As Trump considers next steps, he should judge every proposed action and agreement in the techno-economic and trade space on one question: Does it strengthen or weaken China’s national power industries, especially vis-à-vis the United States?

If you’re wondering why, here’s the short version:

• America is at grave risk of losing leadership to China in a critical set of advanced, traded-sector industries that underpin economic strength, military capability, and geopolitical power in the 21st century—what ITIF calls “national power industries.”

• This is not normal economic competition between market economies. Competition in these industries is win-lose, and market share translates into production scale, innovation capacity, supply chain control, talent concentration, and geopolitical leverage. When China gains global market share, the United States and allied nations do not simply lose sales; they lose industrial capability.

• China’s push to dominate national power industries is not accidental. It is a carefully orchestrated, multi-decade strategic campaign backed by massive subsidies, protected domestic markets, cheap capital, forced technology transfer, and state-directed investment. The goal is to displace Western techno-economic power and reshape the global order under CCP leadership.

• How Washington responds will determine whether the U.S. maintains the advanced production and innovation capabilities necessary to be a leading global power. Incrementalism will not be enough. Nor will maintaining America’s 50-year-old system of financial capitalism.

• Domestic industrial policy alone is insufficient. Even under the best circumstances, the United States cannot fully replicate the scale, coordination, political system, or subsidy capacity behind China’s techno-economic-trade mercantilist model.

That means America must not only strengthen its own national power industries but also take steps to slow China’s progress toward global techno-economic dominance.

Which brings us back to the talks and potential agreements emerging from the Trump administration’s meetings in Beijing.

Any proposed deal in the techno-economic and trade space should be evaluated primarily through one lens: Does it help or hinder the rise of Chinese firms in industries critical to national power?

According to every major media outlet, topics on Trump and Xi’s agenda included tariffs, AI, market access for American firms in China, Taiwan and Iran, rare earths, fentanyl, and technology restrictions. Notably, Beijing hopes to extend the current trade truce and secure relief from U.S. sanctions and tech restrictions. There has also been speculation that Trump and his advisers are seeking a major investment from China, discussing a potential arrangement that would allow China to invest as much as $1 trillion in the United States to build factories and other industrial facilities.

From a short-term political or economic perspective, some of these proposals may appear attractive. But many risk advancing China’s long-term techno-economic position in ways fundamentally misaligned with U.S. strategic interests.

To start, Washington should stop treating advanced tech restrictions as ordinary bargaining chips in trade negotiations. Export controls on certain technologies exist because these industries are foundational to military power, industrial leadership, and geopolitical influence. Relieving pressure on China’s technological upgrading in exchange for temporary trade concessions or commodity purchases risks sacrificing future strategic leverage for short-term optics. The United States is not going to lose its soybean industry. But it could lose its biotech and IT equipment industries.

Similarly, large-scale Chinese investment in U.S. manufacturing should not automatically be viewed as a strategic win simply because it creates jobs or factories on American soil. Chinese investment in the United States is good for China’s strategic interests, not America’s. It lets Chinese firms destroy U.S. firms inside the tariff wall, while siphoning off U.S. intellectual property and gaining access to American industrial know-how. Trump should avoid the siren song of short-term gains and ribbon-cutting. And U.S. investment in China is good for China because it spreads knowledge and boosts local supply chains. That is why the supposed “Board of Investment” should be viewed with caution.

The same logic applies to rare earths and critical minerals. While stabilizing access to Chinese-controlled supply chains may reduce near-term disruptions, dependence itself is part of Beijing’s leverage strategy. The long-term objective should not be cheaper dependence on China, but resilient allied production capacity outside Chinese control. Toward that end, if Xi does not back away from weaponizing rare earths, Trump should threaten to impose controls on the strategic goods China depends on.

Even “market access” requires more scrutiny than Washington traditionally applies. Policies that benefit specific multinational corporations do not necessarily strengthen America’s national power industries. Too often, U.S. firms gain access to the Chinese market while China simultaneously gains technology, industrial scale, supply chain leverage, and strategic positioning that further erodes America’s competitive position. Certainly, a commitment to buy more Boeing jets, if real, is welcome. But let’s be clear: China is only doing this because it previously weaponized a Boeing boycott, which the feckless Europeans were all too happy to capitalize on through increased Airbus sales.

This is ultimately the core problem with how much of Washington still approaches economic relations with China. The United States continues to treat trade negotiations largely as transactional exercises focused on purchases, tariffs, market access, and quarterly economic outcomes. China treats them as instruments of sustained national strategy. Of course, Xi does not have to run for re-election. U.S. policymakers do, with stakes particularly high as midterm elections approach. But those in the administration still can and should act as statesmen focused on protecting America’s long-term security and national interests.

Beijing understands that strong national power industries are now central to geopolitical power. Washington increasingly says the same, but too often still negotiates as though it is competing with a normal market economy rather than a state-directed rival pursuing global techno-economic and industrial dominance.

For the last 20 years, the Chinese strategy has been to stall, buying time to avoid conflict now as they build and get stronger, and as the West gets weaker. This is what Muhammad Ali once famously called the “rope-a-dope” strategy. Trump should approach every proposal coming out of Beijing with that reality in mind.

The question is not whether a deal produces favorable headlines, temporary export gains, or short-term political wins. The question is whether it strengthens or weakens America’s long-term position in the industries that will determine global power in the decades ahead. And based on the initial reports, at least, Trump appears to have left Beijing having mostly failed on that front.

Since the end of World War II, the United States has seen itself in a role like St. Paul’s as it has taken up the mission of spreading the creed, not just of democracy and freedom, but also of free trade, which most policy elites view as a key enabler of the former. Indeed, after it became the global hegemon, the idea of free trade was something that the United States pushed with its proposal for the International Trade Organization (which Congress rejected because of concerns over sovereignty). It then championed the expansion of trade through multiple GATT rounds, and then in 1995, the creation of the World Trade Organization.

Soon after, the People’s Republic of China began to press for membership, because it knew that it needed foreign direct investment as the first phase of its development plan, and it understood that the certainty the WTO gave foreign investors was critical.

And so, the Clinton administration came to promote China’s accession, successfully urging Congress to pass permanent normal trade relations (PNTR) with China in 2000, which helped pave the way for China to join the WTO in 2001

But why did policymakers agree to all this, especially given that China was, and is, a socialist economy? The easy answer is corporate lobbying, as companies wanted access to Chinese markets for sales and production. But while lobbying matters, U.S. policymakers are not completely subject to lobbying forces. The reality is that most of the supporters of PNTR actually believed it to be in U.S. interests.

Why was that?

One reason was that they took the PRC’s promises seriously. U.S. officials treated these commitments as if would any other commitments from a democratic, rule-of-law nation. This is why the U.S. Trade Representative could write that the agreement would prohibit technology-transfer requirements on foreign companies seeking to do business in China; make the PRC radically reduce its rampant intellectual property theft; identify and reduce industrial subsidies; and treat state-owned enterprises no differently than foreign enterprises. None of which happened.

To be sure, if China had actually been serious about meeting those commitments, the harm that China’s rise did to U.S. manufacturing would have been dramatically reduced. But in hindsight, you have to ask, “what were they smoking” to actually take PRC officials at their word. Any China scholar knew that since the rise of Chinese Communist Party in the 1930s, their stated commitments could not be counted on reliably.

This is especially interesting given the fact that Long Yongtu, China’s chief negotiator for WTO accession, said in an interview in May, “When we promised to adopt a market economy, we made it absolutely clear that it would be a socialist market economy.” Maybe U.S. negotiators only heard the last two words, or maybe they thought it would at least be better than a socialist command economy.

The Failure of WTO Enforcement

Some defenders of the PNTR decision will argue they didn’t have to believe the Chinese promises of pink unicorns; they were relying on the WTO to hold China’s feet to the fire. Indeed, the belief was that the WTO system would be so powerful that member nations would be forced to become not only free traders (something China has never sought to be), but also part of the Western liberal order. The reality turned out to be that once the Chinese wolves were let in the WTO henhouse, real enforcement was impossible.

This was true for at least two reasons. First, most of what the PRC did to gain unfair advantage through non-market means was “off the books.” The CCP knew that if they codified these practices into law or regulations, it could be used against them at the WTO, so they used informal administrative procedures and “guidance” that got around the WTO rules. This is why a CCP official could say to me with a straight face that China does not require tech transfer for market access. If he means that the PRC has no law requiring it, he’s right. If he means that the CCP doesn’t require it, he’s lying.

Second, U.S. and WTO trade enforcement both ultimately depend on aggrieved parties bringing cases. In the Senate proceedings on the vote, Senator Frank Lautenberg (D-NJ) stated:

Through China’s WTO accession and the establishment of PNTR, we will be able to hold China accountable for its trade commitments through the WTO’s transparent, rules-based dispute settlement mechanisms. If China arbitrarily increases a tariff on an American product or engages in retaliatory actions against the U.S., we could seek redress under WTO regulations… But if we fail to grant PNTR for China, WTO dispute mechanisms will not be available to us.

But U.S. companies quickly learned that if they asked USTR to bring a WTO case, the CCP’s punishment would be swift and severe. So, like any rational actor, they kept their heads down and just took it. As Harry Broadband, Assistant U.S. Trade Representative from 1991 to 1993, stated:

A lot of U.S. firms would come to us and they would complain about Chinese [imports] and say that we had to put in place safeguards, but they’d always add, ‘Don’t tell the Chinese that we came to you and told you this!’ … They knew that if we started punishing the Chinese in a particular sector, they were going to know that it was Company X and Company Y [that complained].

But with any level of understanding of the CCP’s history and operations, both of these behaviors (guidance rather than laws, and mafia-like threats to complainers) and more, should not have been a surprise.

First-Order Thinking

Another reason U.S. policymakers had faith in PNTR was first-order thinking, which went like this: China has high tariffs. With PNTR and WTO, they will have low tariffs. Ipso facto, U.S. exports will go up.

But these believers overlooked three key factors. First, opening up China’s markets also meant opening up our markets. In theory, this should increase both U.S. exports and imports, so the net employment effect on the United States should be zero. But they seem to have overlooked the import part.

They particularly overlooked the offshoring and import part. There was virtually no discussion during the Senate speeches on PNTR that one major result would be American firms moving production to China for export back to the United States. If anything, the view was that low tariffs on exports to China would lead to more production in the United States. Senator Kit Bond’s (R-MO) comments reflected that rosy scenario:

The benefits are not limited to agriculture, despite what has been argued, benefits do extend to manufacturing and other sectors. For example, one company in my state, Copeland, a division of Emerson Electric, manufactures air conditioner compressors in the wonderful town of Ava, MO. Those compressors are sent to China where they are incorporated in units sold all over Asia. As the market for air conditioners in Asia has expanded, the number of manufacturing jobs in Ava have grown. Those jobs will not go to China and if this agreement is passed the manufacturing jobs in the Ava facility are expected to double.

After China was let in the WTO, Copeland proceeded to establish 3 factories in China and multiple R&D facilities.

Third, policymakers over indexed on tariffs. Tariffs are only a small part of how a country can unfairly boost its trade surplus. Devaluing its currency usually has even larger effects, something China did with abandon. As do industrial subsidies, which as Haley and Haley have shown were massive and played key roles in China becoming a manufacturing powerhouse. As does IP theft and forced tech transfer.

Fourth, policy makers thought free trade was the end in and of itself and it was America’s manifest destiny to bring not only democracy to the world, but free trade. In the senate debate over PNTR, Senator Mike DeWine (R-OH) stated:

The fact is, as we all know, the United States is a leader in the area of free trade. If we fail to pass the PNTR legislation, we would be sending a signal to the world that the United States wants to isolate China. That’s a signal we don’t want to send. Both by word and deed, the United States must be the world’s leader in promoting free trade.

It was never clear why the United States needed to be the leader, although history makes it clear that presidential administrations, supported by the State Department, have long been willing to sacrifice U.S. techno-industrial capabilities for the foreign policy goals of ensuring global democracy and free markets. Many of the key advocates for PNTR, including President Clinton, used foreign policy arguments to justify it. Senator Durbin (D-IL), in explaining his support for PNTR stated, “Trade is the future. Make no mistake about it: trade can open up the exchange of ideas—ideas like democracy, freedom of speech, freedom to worship, and freedom of association.”

In other words, the U.S. goal was to help China become freer. The hope was that economic liberalization would pave the way for political reforms and a greater alignment with democratic values and institutions. Indeed, virtually all the Senate opposition was based on concerns for human rights in China, not on whether the deal would be good for U.S. techno-economic capabilities and strength.

Fifth, policymakers assumed continuing U.S. tech dominance. This was after all, the late 1990s, when the U.S. technology boom was in full swing: Intel, IBM, Lucent, Microsoft, Motorola, and others. China, in contrast, could hardly afford bicycles. So, consistent with conventional trade theory—something PRC leaders never accepted—the agreement would allow the United States to specialize in high-tech, high-value goods and services, while China would supply us with t-shirts and Happy Meal toys. The fact that Chinese unfair competition helped weaken or kill Intel, IBM, Lucent, and Motorola appears to be conveniently glossed over.

Water Over the Bridge

As they say, this is all water under the bridge—or, more like water from a broken dam that destroyed the bridge. What is done is done.

The key question is, can we learn from those mistakes going forward? Yes, there are three main lessons, none of which the Trump administration appears to be taking to heart.

First, U.S. policymakers, pundits, and journalists need to be much better at thinking two, three, or even four moves ahead of our adversaries. Simply repeating bromides like “trade is the future” does not cut it. Nor does unreflectively sticking to team loyalties. (“I am against Trump, so I will continue to repeat globalist bromides.”)

Second, policy processes, both in Congress and in administrations, need to be much more deliberate and averse to group think. Whether this entails formal red and blue teaming or other mechanisms to encourage airing a wide variety of expert views, the USG needs to become much better at this. Current interagency processes fall far short.

Third, trade policy has been dominated by lawyers: The task was to eliminate trade barriers, which are still believed to be laws and regulations, so lawyers were the ones who you wanted to lead the charge. But while lawyers can tell you if a contract is good or not, they can’t tell you if it’s the right contract.

Case in point. If trade policy in the 1990s had been led by techno-economic industrial policy strategists, one of the things they surely would have pointed out (if they were any good) was that manufacturing tends toward agglomeration, and if a nation like China could gain adequate momentum—which it has thanks to low costs, forced foreign direct investment and tech transfer, and a global free trade regime that prevents other nations from taking action against unfair practices—it could lead to a vicious cycle where China first becomes the global manufacturing powerhouse and then graduates to become the global innovation leader (as we are now seeing). Meanwhile, other former leaders, including the United States, would lose capabilities, including in the industrial commons, and suffer largely irreversible techno-industrial decline. But individuals with those insights and capabilities were few and far between in the federal government (and they remain so), and to the extent they are there at all, they are like Milton in Office Space, stuck in the basement without his stapler.

Finally, it’s time once and for all to end utopian globalist thinking about free trade. It was a wonderful John Lennon-like vision, one that even looked attainable after the fall of the Soviet Union. But until the PRC is replaced by a true democracy, global free trade will be impossible. They will simply not play by fair rules.

As such, we will need to go back to a pre-1990 trade regime, with the free world economically integrated, and the Communist world limited. That doesn’t mean the same level of isolation that was imposed on the Soviet Union. But it does mean replacing free trade, not with Trumpian protectionism, but with strategic international economic relations. That will be the subject of a forthcoming post.

He distinguished it from “uncreative destruction,” which might destroy a nation’s productive assets through natural disasters, wars, predatory foreign trade policies (China, I’m looking at you), or broader societal decay and limited reinvestment.

Creative destruction, on the other hand, refers to assets being destroyed, either physically or monetarily, because a more effective and innovative alternative has emerged.

The most iconic example of creative destruction—the transformation of England’s textile industry from a cottage industry—was not driven by war, but by the introduction of cutting-edge machinery, primarily the spinning jenny, water frame, and power loom. These innovations destroyed many rural jobs, but they also significantly improved living standards, allowing ordinary Brits to afford clothing. It also gave us the term “Luddite.”

Likewise, we didn’t lose massive numbers of horses in the early twentieth century because of some equine disease; we lost them because people stopped buying horses and started buying cars.

But a natural reaction to this process, one that’s common in dynamic societies, particularly among people high on the empathy scale (e.g., “Caretakers”), is to ask: Can’t we have growth without destruction? We see this today in debates over AI and robotics, where empathic Caretakers (I’m exempting the pure Luddites from this conversation) want to limit job-replacing technologies and allow only those that complement workers.

To be sure, that would reduce some layoffs, a plus for Caretakers. But it wouldn’t eliminate them. Why would an organization invest in AI, robotics, or any other capital equipment—even if it complements workers—if not to boost production and cut costs? Otherwise, where does the return come from?

That means even worker-complementing technologies will still raise efficiency, just not as much as job-replacing technology, and firms will employ at least somewhat fewer workers. Even if a company could expand its market share without any layoffs, the firms losing that share would have to let workers go.

But the reality, at least to hard-hearted realists (me, I’m looking at me), is that job-replacing technology generates more growth. Would we be richer or poorer if the automatic electric switchboard hadn’t been developed and telephone companies continued to rely on manual operators to connect calls? Would we be richer or poorer if we had given longshoremen better winches instead of adopting the standardized shipping container? Would we be richer or poorer if airline ticket agents had better computers but passengers were not allowed to check in for flights on their smartphones? Hint: poorer.

Given this dichotomy between Caretakers and hard-hearted realists, is there any way to square the circle? Thankfully, there is—if Caretakers are willing to accept some pain and realists are willing to show some compassion. In this ideal world, creative destruction would not be opposed; in fact, it would be encouraged. But individual workers who are hurt would be helped to transition to new opportunities.

Perhaps the closest real-world example to this ideal is found in the Nordic countries. While generally supporting creative destruction (albeit less so than the United States), these nations do an excellent job of helping workers transition between jobs through their “flexicurity” model, which balances flexible hiring and firing rules with generous unemployment benefits and active labor market policies.

It would be nice if we had precise measures of a nation’s acceptance of or resistance to creative destruction. But in their absence, I have sketched the following conceptual framework (see figure 1). The x-axis represents the degree to which countries resist creative destruction, based in part on how difficult it is to fire workers and partly on my admittedly subjective evaluation. The y-axis represents the degree to which countries act as Caretakers (e.g., helping workers transition) versus hard-hearted realists (e.g., leaving workers more on their own), based largely on the share of income replaced for laid-off workers after one year.

So, the farther right a nation is on the x-axis, the more it resists creative destruction. And the higher up a nation is on the y-axis, the more support it provides to workers affected by disruption.

Needless to say, the upper-left quadrant is the place to be: low resistance to creative destruction, high growth, and reduced individual hardship from disruption. Think Denmark, Finland, and Sweden, although rising levels of non-EU immigration are prompting renewed debates about the sustainability of their generous welfare systems. And even though these countries are generally more accepting of creative destruction than their European neighbors to the south, they could still move somewhat closer to the U.S. model.

Nations in the upper right generally resist creative destruction—they would rather generate growth by adding new capacity (e.g., building an R&D lab or a chip fab) than by displacing incumbents (e.g., supporting the taxi industry versus ride-sharing apps)—while still providing generous support to displaced workers. Think Belgium, France, Germany, Italy, and Spain. Unfortunately, these countries, rather than the EU nations in the upper-left quadrant, tend to dominate the European government, which is a big reason EU policy is often hostile to creative destruction.

Countries in the lower left are generally comfortable with creative destruction and typically view workers hurt by it as on their own, providing relatively little support. No advanced economy does nothing to help displaced workers, but many don’t do much, and some do even less than others. Enter the United States. Although Luddite forces are sadly gaining ground rapidly, pushing to move the United States toward the lower-right quadrant (resistance to creative destruction, coupled with low worker support)—or, in some cases, toward the upper right via universal basic income (while still resisting creative destruction)—the current system still leans toward growth first, support second. Other countries here include the United Kingdom, Canada, and Australia.

The lower-right quadrant is arguably the worst place to be, at least in terms of creative destruction. It’s the worst of both worlds: These countries are okay with new technologies, as long as no one loses a job (leading them to resist creative destruction, despite enjoying its outcomes), and they don’t provide much assistance for workers hurt by change. Specifically, when disruption occurs, they provide less support than continental European nations. Think Japan and South Korea.

One final note. It’s not clear that even if the United States significantly improved its system for helping dislocated workers—as ITIF has proposed—the growing, increasingly strident chorus opposing technologically driven creative destruction, particularly from AI and robotics, would suddenly take a breath and quiet down.

I’d like to believe that better support would buy more political tolerance for disruption, but I remain skeptical. Ludditism is just too fashionable and too individually rewarding for its advocates now.

So yes, Congress should move the U.S. worker adjustment system closer to the Nordic model. But at the same time, supporters of growth must be prepared to fight politically, rhetorically, and intellectually to preserve America’s comparative advantage in embracing creative destruction.

So, thunder struck, and lo and behold, the temple on high now appears to concede that industrial policy might be okay, at least for lower-income nations. The new tablet, in the form of a report titled Industrial Policy for Development, is supposed to represent a turning point—and an apology from the temple hierarchy for getting it wrong.

Like I said, the World Bank’s departure from orthodoxy created panic among the faithful. Free market ideologues are pissed:

• The Wall Street Journal writes that the “World Bank embraces industrial policy, abandoning three decades of stigma.”

• Reason, the nation’s largest libertarian magazine, says that the World Bank “used to champion markets. Now it’s surrendering to state-led industrialization”; oh, the horror.

• The Washington Post’s now free market-focused editorial board is appalled, declaring that “industrial policy won’t work.”

Okay, calm down. Don’t get your knickers in a twist.

First, if the journalists had actually read the report, they would have found that it is largely a wolf in sheep’s clothing. Not to worry: The World Bank is still committed to its old ideological ways. Sure, it writes that nations can try industrial policy. But it also claims that even if they get it right, it has almost no positive effects, apparently boosting GDP by at most 1 percent.

Second, if countries are desperate for growth, the report says to go ahead and dabble in industrial policy for a few years—but then, by all means, get back to the tried-and-true free market “fundamentals,” like macroeconomic stability and a good business climate.

The report’s key box on industrial policy advice says it all. In order of priority, governments should:

1. Not pursue industrial policy; they should just focus on getting the fundamentals right.

2. Spend little money if they insist on going down this path (that way, they’ll do the least harm).

3. Provide market incentives.

4. Not engage in macroeconomic policies like exchange rate devaluation, even if it makes their manufacturing sectors uncompetitive.

And amazingly, the report states, “More research is needed to understand whether and when general tax credits for research and development in private businesses translate into valuable inventions.”

What? You mean more than 30 years of research, with hundreds of academic studies showing that they do work, doesn’t suffice? Clearly not to the World Bank, which seems to be waiting for a study that says R&D credits don’t work.

Plus, the Bank suggests that while countries may want to pursue industrial policy, they are likely too incompetent to execute it effectively. The fact that some, if not many, governments have not gotten industrial policy right—and the theory and evidence of what constitutes doing it “right” are very clear—leads it to conclude they should avoid it altogether.

This is a bit like saying a bunch of countries got monetary theory wrong, so get rid of your central bank. Or, since various nations failed to properly support education, you might as well do away with your education ministry.

The World Bank chief economist closes his foreword by essentially saying: If you must do this malpractice, don’t say we didn’t caution you first. He writes that the report “warns every government—poor, middle income, or rich—that when it comes to industrial policy, its reach can easily exceed its grasp.”

You can almost hear their anguish and moans. “Damn, we have to say something good about industrial policy. All the countries we help are demanding that we give them something. But we really don’t want to.” You could see them working till the pips squeak.

Let’s be perfectly clear. Despite the patina of economic science, this is simply ideology speaking. Nothing more. The Bank believed then, and continues to believe now, that market failures are very rare (except perhaps pollution), and that government failures are endemic. So, there is nothing countries can do except get out of the way and enable the full working of market forces.

This ignores the theory and evidence that demonstrate why this is wrong, as generations of non-neoclassical economists have advised. These endogenous growth economists, neo-Schumpeterians, institutionalists, and innovation economists have a long and distinguished body of academic work that rebuts and effectively refutes this ideological position. Amazing scholars like Sidney Winter, Richard Nelson, and Richard Lipsey have been treated as heretics by the priesthood and systematically excluded from the establishment.

Which gets me to my main point: World Bank, you screwed up. Not just a bit, but a lot. You led so many countries down the wrong path, and that led to limited growth. Countries that ignored you, like Taiwan, Singapore, South Korea, and, of course, China, prospered.

Chinese policymakers embraced national developmentalism based on Friedrich List and Joseph Schumpeter, rejecting Adam Smith and David Ricardo. As a result, they not only grew dramatically but also sucked up much of the world’s manufacturing oxygen and deindustrialized large parts of the developing world, probably for at least the next half century.

Indeed, China is trying to consign the Global South to Ricardian comparative advantage: Sell us your food, minerals, and energy, and we will sell you advanced goods. To which World Bank economists cheer and say, “Ah, see free markets and globalization at work.” At least the IMF has a few economists who really understand industrial policy and are allowed to write about it.

It’s not great to be wrong for a generation. But at least have the courage to say you were wrong—which this report fails to do.

Let’s be honest: The World Bank won’t change its ideological religion or the terrible advice it continues to give. Only the creation of a new institution, guided by new growth theory and national developmentalism, will result in change. And that certainly won’t happen as long as China and the United States control the Bank.

China wants the Bank to continue to preach Ricardian economics so it doesn’t face competitors in the Global South. And the U.S. is too ideological to know that neoclassical economics is a failure. So, the result is that the Global South turns to China for advice, seeing how it was one of the few countries that broke out of the low-income trap. Except they don’t know that China has no interest in helping them. And developing nations keep struggling.

Nah, just kidding. Not going to happen, even though masses of pundits, journalists, economists, and think tankers have jumped on this cool-kid bandwagon to sound the alarm.

One paper published by Brookings—which, by the way, proposes taxing AI to slow it down—argues that “rising automation of intelligence tasks increases and then decreases wages.” In other words, the economy expands significantly, but wages go down.

How do we know they’re correct? Easy, they use cool math like: dγ/dL = ∂γ/∂P · dP/dL + ∂γ/∂I · dI/dL. Case closed.

Here is my math: G × (1 + p) = G1, where G is output, p is the rate of productivity growth, and G1 is the size of the economy after productivity growth.

Another paper, by Philip Trammell and Anton Korinek, the latter an economist who seems to make a living scaring people about AI, also uses elaborate math to conclude that, because of that damned AI, wage inequality may grow such that many people cannot earn enough labor income to live on. Well, that doesn’t sound so bad.

And the media laps this stuff up. Dustin Guastella’s The Guardian headline reads, “AI will make the rich unfathomably richer. Is this really what we want?” I don’t know, Dustin. Let me think about that. NPR’s Morning Edition tells us that “AI could widen the wealth gap.” You get the idea.

Here’s why all this is, at worst, wrong and, at best, vastly overstated. There are at least three theories underlying the case that AI will exacerbate inequality.

The first is that only a few companies will control the AI means of production. And since they will have an oligopoly, they will make massive profits. Imagine that, because of AI, GDP could magically rise from $27 trillion to $100 trillion by 2050 (it won’t happen, but let’s pretend). In the wealth-gap alarmists’ world, the three or four AI companies would pocket profits north of $75 trillion per year. Right.

This is obviously far-fetched, but it’s worth explaining why. There will still be car companies, hotel companies, insurance companies, consulting firms, and—dare I say—think tanks. While most may use AI to boost productivity, they will be purchasing it from companies that must compete for their business. So AI companies won’t be producing everything and capturing all the profits; they’ll be producing a tool that other companies use. Moreover, these AI giants will have to compete for customers, which means their profits, while likely robust, will still be constrained.

If that first scenario is science fiction, the next one is no less so: the idea that AI will do all jobs. You know the story everyone tells today—workers are left destitute, and if their AI overlords are feeling generous, they let governments redistribute some of their exorbitant wealth to the masses through universal basic income.

This won’t happen. For now, consider undertakers, kindergarten teachers, plumbers, police officers, firefighters, chefs, nurses, dentists, and carpenters. Regardless of how capable robots become (and they still have a very long way to go before handling jobs of this complexity, whatever Elon Musk may claim), they will not be doing these jobs. Automation may eliminate some roles, but that drives down prices, giving people more purchasing power to spend on other things, which in turn creates compensating jobs elsewhere.

Okay, setting aside these two far-fetched theories, there are more plausible ones. The third scenario, again from Brookings, is that “AI could increase inequality by giving a stronger productivity boost to already highly-paid knowledge workers, while leaving many lower-skilled workers in in-person service and manual labor jobs behind.”

But they have it backwards. Eliminating half the high-wage jobs—think lawyers, consultants, and psychiatrists—would actually reduce inequality, because it would mean that middle- and lower-income people can pay less for services currently provided by high earners, and there would simply be fewer workers earning those high incomes.

Besides, income inequality is not really driven by the fact that your doctor earns half a million a year; it’s driven by the fact that an NBA star earns $50 million and a hedge fund manager earns $500 million. Income inequality is, first and foremost, a winner-take-all phenomenon. AI won’t change that, unless we can automate the obscenely rich stock-trading class.

In the meantime, let’s scratch this AI fear off the list. It’s not like the AI doomers lack discussion topics. They clearly have plenty more they can turn into TED Talks.

The message from Brussels has been clear: Large U.S. tech companies have no right to give European consumers and businesses what they want. Only less innovative EU companies can do that.

You know what? We Americans agree with this principle completely. Which is why we are insisting on the immediate investigation and regulation of what we call “Big Spread,” including the potential breakup of Nutella.

It’s time for spread sovereignty.

As former FTC Chair Theory Britannia recently wrote:

As individuals, we spend four to five hours a day engaging with the delights of hazelnut-chocolate spread, from bread and pastries to eating it straight out of the jar late at night. It is essential, therefore, that we have control over how the spread space is organized, structured, and regulated.

Hear, hear! I mean, consider the facts. Ferrero, an Italian corporation that started in the small town of Alba, Piedmont, with nothing but a big dream—and now operates as a global powerhouse headquartered in Luxembourg—has achieved a stranglehold over the American breakfast table that would make Mark Zuckerberg blush.

There is no meaningful domestic competitor. American children have been algorithmically—or rather, hazelnutically—nudged into Nutella dependency from an early age. Parents report feeling unable to switch from that mouthwatering spread. Indeed, the switching costs are enormous.

Try telling a nine-year-old to use organic American almond butter. You cannot.

And let’s be clear: this is “Big Spread.” Ferrero has roughly quadrupled its sales since 2018, when it already held a dominant position in the expanding U.S. spread market.

Where is the American Nutella? It does not exist. Ferrero has used its dominant market position, its network effects (once Nutella enters a household, it spreads—literally), and its addictive interface design (that distinctive jar, seamlessly optimized for hands of all sizes) to crush any domestic alternative before it could scale. And where it could not, it bought competitors up through classic “killer acquisitions.”

This is precisely the behavior Brussels claims to find intolerable when Americans do it.

Google offers other search engines. Apple allows third-party browsers. But Nutella? Name one open-jar competitor with equivalent market penetration. Once again, you cannot. The hazelnut-chocolate spread market is a de facto monopoly, and Washington has done nothing about it.

The national security implications alone should trigger a CFIUS review. Ferrero controls the morning mood of millions of Americans, ages five to ninety-five. And he who controls breakfast controls the workforce pipeline. Europe knows this! That’s why they kept the good stuff and exported the rest here.

We are not against trade. We are not against hazelnut-chocolate deliciousness. We are simply asking for the same standard to be applied in both directions.

If European regulators can demand that American companies interoperate, open their platforms, and face structural remedies for dominance, surely American regulators can demand that Nutella jars carry a label reading: “This product was produced by a foreign monopolist with zero domestic alternatives. The FTC is aware.”

But the FTC needs to do more than be aware. We need a “Spread Services Tax,” under which large foreign spread companies would pay 5 percent of their U.S. revenues to the federal government.

Congress needs to pass a Hazelnut Products Agreement (HPA) that designates sellers with annual sales above $2 billion as “gatekeepers.” With that designation would come obligations, meaning they could no longer discriminate against America’s mom-and-pop spread businesses. This would require mandatory disclosure of their recipe and customer list to any American hazelnut-chocolate spread provider. And if they are found in violation, the FTC would have the authority to fine them up to 5 percent of their global revenues.

In addition, legislation should charge the FTC with bringing cases against any spread firm that has acquired American companies in the past decade with the intent of rescinding those mergers. Do Americans want long-admired companies like Keebler and Butterfinger to be owned by foreign corporations?

And of course, Ferrero and the other European monopolists want us to abandon our hard-fought regulatory protections for American consumers. That is why we need to make it illegal for foreign spread companies to scrape publicly available images of Americans enjoying Nutella, because, as we all know, those images will be used in breakfast recognition databases that identify us.

Like Theory Britannia said:

America’s vast spread market is open to all. But those who want to benefit from it must abide by our conditions. If our trading partners have no respect for the rules, then they have no access to the market.

To be sure, Ferrero invests heavily in the United States, spending more than $5 billion over the past five years on North American manufacturing and logistics to support its growth. Since 2020, it has invested in a new innovation center and R&D labs in Chicago, expanded its manufacturing plant in Illinois, built three new distribution centers across the United States, and expanded its corporate headquarters in New Jersey.

But none of that changes the fundamental problem: Ferrero is not American-owned. We need spread sovereignty.

With no global Big Spread leaders of our own, the United States must now combine ambitious regulation with massive infrastructure investment, sovereign innovation, and talent development.

Critics say this effort would waste billions by replicating existing products and technologies, tie up our best engineers, and deliver no real strategic impact. Some even argue that the United States’ resources would be better spent on R&D in critical sectors where it could scale and eventually lead.

I say those critics aren’t thinking very critically. Spread sovereignty will allow us to regain control over our infrastructure, reduce dependence on foreign actors, and protect our fundamental rights. We must resist external pressure and assert the strength of our sovereign industry.

Until then, Europe will continue spreading—across our toast, across our children’s lunches, and, apparently, across our digital regulatory vocabulary too—its dominance in the United States and around the world.

(The author of this article accepts no funding from Jif, Skippy, or any hazelnut-chocolate lobby. Yet.)

Good news, of course. Europe is finally waking up to the fact that it has serious innovation, competitiveness, and productivity challenges—what the 2024 Draghi report calls “an existential challenge.” The bad news? Very few European leaders are willing to acknowledge that Europe’s problems are caused by its social democratic worldview. Until that changes, not much else will.

The Draghi report essentially says the EU badly needs growth so it can continue doing what it has been doing. I hate to be the bearer of bad news once again, but it doesn’t work that way. Growth requires change. It is not manna from heaven that lets you keep your poor, non-growth habits.

The report states:

If Europe cannot become more productive, we will be forced to choose. We will not be able to become, at once, a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage. We will not be able to finance our social model. We will have to scale back some, if not all, of our ambitions.

The right statement would have been: “If Europe wants to become more productive, we will have to choose.” Choose between the precautionary principle and the innovation principle. Choose between a large social safety net and a competitive business environment. Choose between stability and creative destruction. Choose between a comfortable petit bourgeois commercial sector and a rough-and-tumble, mega-corporate sector that can fight and win in global markets, especially against China. Choose between America and China.

The report goes on to wax eloquently about:

Europe’s fundamental values are prosperity, equity, freedom, peace and democracy in a sustainable environment. The EU exists to ensure that Europeans can always benefit from these fundamental rights. If Europe can no longer provide them to its people – or has to trade off one against the other – it will have lost its reason for being.

I thought Europe’s fundamental values, at least since the Enlightenment, were rationality, scientific progress, industrial development, and wealth creation. So the better question is not whether it will have to make trade-offs, it will, but whether Europe continues to degrade into a deindustrialized tourism economy marketing its Middle Ages cathedrals and quaint urban squares. If it does, what will Europe’s reason for being be?

Once you set the terms of debate by putting much of the needed change off base for consideration—as violations of Europe’s fundamental values—all that is left is technocratic tinkering. Everything meaningful has been defined as anti-Europe.

Of course, the number one “tinker” is the single market. During a speech last November, European Central Bank President Christine Lagarde said that EU growth was slowing (from a business-cycle, not productivity, perspective) and that the answer was more cowbell. Sorry, I couldn’t resist: more single market. How many years does it take to get there? You’ve been at it since at least 1951 with the European Coal and Steel Community. Either force it on the member states now or just admit they don’t want one and move on to things you can actually do.

As for the Draghi report, it highlights three goals to “reignite sustainable growth.”

“First, and most importantly, Europe must profoundly refocus its collective efforts on closing the innovation gap with the US and China, especially in advanced technologies.”

Ah, yeah… did you see the memo about this? To close that gap, Europe actually has to abandon its ambivalence toward these technologies and embrace the creative destruction that comes with them. It also needs to stop believing that the EU regulatory juggernaut is a growth engine. In reality, it is a Sisyphean task to try to catch up with America and China in digital technologies like cloud computing, internet search, social media, and the like. You are so far behind that your efforts will fail, diverting human, political, and financial capital from areas where Europe could really lead, such as biotechnology, automotive, robotics, advanced chemicals, and more.

“The second area for action is a joint plan for decarbonization and competitiveness.”

This is like calling for a joint plan to eat more hamburgers and reduce heart disease. However noble the EU’s intentions to save the world from climate change, this is a plan for non-competitiveness. By raising EU energy costs and shackling EU producers with a multitude of restrictions, EU exporting firms, especially energy-intensive ones, will continue to lose market share, and EU productivity in the energy sector will fall. Saying that decarbonization is a growth strategy does not make it one.

“The third area for action is increasing security and reducing dependencies.”

This goal is even more hollow. While the report doesn’t come right out and say it, it effectively calls for independence from both the Chinese Communist Party and the U.S. Republican Party. Good luck with that. After China takes most of your auto, chemical, machine tool, biopharma, and electrical equipment market share, dependency on America for internet applications will be the least of your worries. Besides naively treating America and China as equal threats, this “reducing dependency” strategy means not only wasting money on sectors that Europe should be trading with the free world for (like many advanced logic and GPU chips) but also diverting attention from building on the EU’s actual strengths to drive specialization and global leadership.

When it comes to what to do, the report is more of the same. “First,” the report calls out that “Europe is lacking focus.” No kidding, but the real question is why Europe lacks focus. It is not because of a lack of widespread understanding of its challenges. The Draghi report is just one in a long line of op-eds, books, and reports that have called attention to them.

There is little focus because the political base doesn’t want to focus on competitiveness, productivity, and innovation. It wants a stronger social safety net. More climate regulation. More subsidies and protections for small companies. Keeping farmers happy. Regulating pretty much everything, even technologies barely emerging from the lab. Making sure everyone everywhere gets their piece of the Brussels pie so the Union doesn’t fall apart. And of course, blaming the Americans.

The problem is not focus; it is fundamental orientation and a rigid commitment to a fantasy world. The reality is that Europe’s idea of a growth policy is to slightly reduce its resistance to growth and digital disruption. It is to slightly reduce its restraints on business and innovators. It is to prosecute American tech companies just a bit less.

Europe’s idea of a growth policy is certainly not—to paraphrase Martin Wiener’s 2004 book, English Culture and the Decline of the Industrial Spirit, 1850-1980—to worship size, speed, digitalization, and money. (For more on the role culture plays in economic strategy and digitalization today, see my two-part post from February.) At its core, the EU reflects a general ambivalence toward the digital economy and society, which dampens rather than promotes digital transformation. For Europe, the digital glass is always half empty.

As such, all the talk in the Draghi report is nice, but it misses the point. The EU will not change unless there is a broad-based, fundamental change in how it sees itself in the world economy. The single most important thing European elites can do is recognize that they no longer live in a world where they can be “price makers.” In other words, leaders in Brussels and the national capitals have long deluded themselves into thinking they could create a globally dominant Europe that replaces the crass American hegemon. A Europe so big and powerful that it could ignore the requirements of a competitive business climate (including avoiding innovation-crushing regulations and the climate “hair shirt”).

EU leaders have also convinced themselves that social democratic policies expanding redistribution and regulation are pro-growth. In recent years, the EU has gone even further, believing it can export this model globally and establish its social democratic utopia as the dominant paradigm—with Europe at the center. Abandoning that dream is painful, to say the least, which is why Europe shows so few signs of change.

Indeed, the prevailing view is: “No need for us to change, especially not to become like those libertarian, gun-toting Americans. We will change the world, not America or China.” The Draghi report is ultimately a call for growth so that this EU utopian project will have the heft to succeed. More growth means change can be avoided. But let’s be clear, the project was doomed in a world where countries compete intensely for technological leadership. Few countries want to self-impose the EU’s shackles.

And while many are happy to take some EU subsidies, they will not be constrained by the EU’s “no-growth” regulatory model. Even worse for the EU’s utopian ambitions, the new “price maker” is China, which is outright hostile to the EU project and everything it represents. Unless the EU jettisons its noble but futile yearnings, it risks becoming a vassal state to Beijing. Enjoy your “prosperity, equity, freedom, peace, and democracy” then.

China, in particular, should serve as the wake-up call. Europe failed to fully integrate. It clung to the belief that social democratic economics was not a recipe for stagnation. It opposed large corporations and idolized small, independent (and often unproductive) firms. It tried to win in digital industries where it had little chance, and in the process became reflexively anti-American. Now, Europe is not just losing; it is falling behind decisively. And it is China, not the United States, that is outcompeting it.

The bottom line is that fixing the EU’s productivity, innovation, and competitiveness crisis will require more than speeches from neoclassical economists like Lagarde or reports from social democratic technocrats like Draghi. It will require a fundamental political reorientation.

Alas, as the failures of social democratic, socialist, and green policy visions become more evident each year (including the shortcomings of mass immigration), the alternative emerging in Europe seems to be a hard-right nationalist reaction, one that looks increasingly Trumpian in its competitiveness thinking (e.g., deregulation, expanded energy production, protectionism). But these movements do not seem interested in supporting what Europe truly needs either: a centrist, national developmentalist agenda that accepts the world as it is; aligns with the United States to preserve freedom and democracy; and fully embraces, with enthusiasm, creative destruction, rapid innovation, and robust economic growth.

Until Europe makes that shift, it will remain stuck—and we can expect more Draghi reports, more tinkering, and, ultimately, more decline.

According to the neo-Luddite chattering classes, AI is going to kill entry-level jobs. Most people no longer buy the panic that AI will kill all jobs, so the new panic is that it will kill most entry-level jobs.

Just imagine: You’ve paid tens of thousands of dollars to send your kid to college, and now they’re living in your basement, unemployed.

• Former Transportation Secretary Pete Buttigieg warns that “not in 30 or 40 years, but in three or four, half of the entry-level jobs might not be there.”

• Aneesh Raman, chief economic opportunity officer at LinkedIn, says AI is breaking the “bottom rungs of the career ladder,” as junior software developers, junior paralegals, first-year law associates “who once cut their teeth on document review,” and young retail associates are being supplanted by chatbots.

• Steve Bannon chimes in: “I don’t think anyone is taking into consideration how administrative, managerial, and tech jobs for people under 30—entry-level jobs that are so important in your 20s—are going to be eviscerated.”

And when influential figures start throwing around alarming numbers, the concern for many Americans becomes more than just rhetorical. Just this week, Virginia Senator Mark Warner asserted that AI’s economic disruption “is going to be exponentially bigger” than he thought just a few months ago, adding, “Recent college graduate unemployment is 9 percent. I’ll bet anybody in the room it goes to 30 or 35 percent before 2028.”

You get the idea. Total catastrophe.

But let’s slow down for a second and think this through.

First, this probably won’t happen, at least not as described. Most entry-level jobs are not knowledge jobs, because most jobs are not knowledge jobs. Even with dramatically better AI, there will be vast amounts of work only humans can do.

Does anyone think self-driving school buses won’t require an adult on board? What about police officers, fish and game wardens, stonemasons, plumbers, flight attendants, priests, or models? AI doomers make the mistake of assuming all jobs look like theirs—white-collar knowledge work.

But most of the economy involves working with people, physical things, or problems complex enough that AI simply can’t handle them: legislators, CEOs, antitrust attorneys, surgeons, and so on. Entry-level carpenters, health aides, and patrol officers aren’t going anywhere.

Second, even if the dire scenario materialized, the scale is more manageable than the headlines suggest. Entry-level white-collar jobs account for less than 15 percent of the U.S. labor force. Eliminating half of them over five years would mean roughly 2.6 million job losses per year.

That sounds alarming, until you note that, according to the Bureau of Labor Statistics, around 20 million U.S. workers are laid off or fired every year under normal conditions. In other words, 2.6 million is only about six weeks of routine labor market churn.

Third, even if employers everywhere stopped hiring inexperienced workers, the labor market wouldn’t simply freeze. Think dynamically.

Suppose half of May’s college graduates don’t land jobs. They’ll be supported somehow—by family, savings, or government programs—and they’ll spend that support on food, clothing, entertainment, and other goods and services. The companies providing those things will face higher demand and need to hire more people to meet it.

Don’t wave this away. A company that was selling to a million customers employs a certain number of workers. If it’s now selling to 1.1 million customers, it will need roughly 10 percent more workers to meet that demand. Where will those workers come from? Possibly the very cohort of college graduates who didn’t get knowledge-economy jobs in the first place.

“But companies won’t hire inexperienced workers,” you say. They’ll face a simple choice: forgo the additional sales or invest in training new hires. If one firm declines, a competitor will see the opportunity and take it.

Now let’s assume you’ve wrapped your head around all the above and are starting to feel less panicked for those college seniors and twenty-somethings hoping to get a job. Wait… then you start to panic again, remembering that CEOs and politicians alike are tossing out scary data and shouting from the rooftops: “It’s happening, really! AI will very soon lead to mass entry-level job displacement.”

Okay, let’s circle back to the prediction Sen. Warner made at the Axios AI+DC Summit: “Recent college graduate unemployment is 9 percent. I’ll bet anybody in the room it goes to 30 or 35 percent before 2028.”

I’ll take the bet. But let’s dissect the senator’s argument.

To start, Warner’s claim that the recent college graduate unemployment rate is 9 percent is wrong. According to the Federal Reserve Bank of New York, the unemployment rate for recent college graduates was 5.6 percent in December 2025. Across the full year of 2025, the recent graduate unemployment rate ranged between 5 and 6 percent—nowhere near 9 percent.

When compared to all workers, this 5 to 6 percent range isn’t much higher than the unemployment rate for all workers, which currently stands at about 4 percent. Even young workers without a bachelor’s degree have unemployment rates below Warner’s claim, ranging from 7 to 8 percent in 2025.

Next, Warner’s assertion that AI will lead to an unemployment rate of 30 to 35 percent is highly unlikely.

In the last 35 years, the highest recent graduate unemployment rate reached 13.4 percent in June 2020, driven by widespread shutdowns during the COVID-19 pandemic—not by technology. The recession in 2010 was the only other period of elevated unemployment for recent graduates, peaking at 7.9 percent.

Here’s what people need to firmly grasp: Even during severe economic shocks, the recent graduate unemployment rate was nowhere near 35 percent.

Warner’s prediction, and others like it, is a stretch. If anything, AI will lead to greater productivity and, subsequently, economic growth, which will have the opposite effect of the 2010 recession and the pandemic. Indeed, a study published this month found that firms adopting AI are experiencing labor productivity gains that are expected to strengthen in 2026.

This latest round of panic is, once again, first-order policy thinking at its worst. AI reduces some entry-level positions; therefore, the story ends there, and your kid lives in the basement forever. History suggests otherwise.

In fact, 10 years ago, when an increasingly large number of pundits and scholars began arguing that technology would soon lead to large-scale displacement of workers, I made a Long Bet: that by June 2025, the labor force participation rate would be above 60 percent and the unemployment rate would be below 7.5 percent.

Ten years later, I won that bet. Like I said then and have continued to say—be patient and don’t panic. Because no, robots won’t kill our jobs, emerging technology won’t cause long-term unemployment, and automation won’t result in net job losses.

Rather than fear technological change and automation, embrace it. Automation boosts productivity, and increased productivity lowers prices or raises wages, or sometimes both. In turn, lower prices and higher wages increase spending and investment, which ultimately create jobs, including entry-level ones. Oh, and we’ll all be richer too.

The last slide admits as much, revealing that the poll’s ultimate purpose is to identify which AI-related rhetoric most effectively “increases support for Democrats.” Everything upstream of that conclusion should be interpreted accordingly.

This is important because the progressive left appears to believe its best hope for electoral success in 2026 is to advance a narrative centered on inflation, job loss, and other disruptions, rather than a message about how Democrats can do a better job than Republicans at growing the economy.

The report’s most fundamental problem is the design of its questions. Throughout, respondents are presented with false and tendentious dichotomies.

On AI and worker protection, for instance, they are asked to choose between “providing help for American workers… even if that means limiting the amount that American tech companies can profit” versus “providing incentives for American tech companies… even if it allows tech companies to profit while eliminating jobs.”

This framing presupposes a zero-sum conflict between workers and tech companies, ignoring the substantial economic literature demonstrating that productivity-enhancing technology broadly raises living standards over time.

Unsurprisingly, when you construct a question to sound like a choice between helping workers and enriching corporations, most respondents choose the former. That tells us nothing about what people actually want from AI policy.

The poll also primes respondents with emotionally loaded language before measuring their views. The framing of an economy “already rigged for the elite” that uses “new technology to further stack the deck” against the American people is introduced not as a hypothesis to test but as an established backdrop. It then treats the resulting 64 percent agreement as confirmation. This is circularity dressed up as data.

Similarly, the poll conflates general cost-of-living anxiety with technology-related concerns—specifically, the rise of AI. It artificially manufactures the appearance of an AI-driven economic crisis when the underlying grievance is simply inflation and wage stagnation.

The report also presents the “cost-of-living crisis” as a settled reality, despite the fact that U.S. median wages have grown, albeit modestly, over the past year.

The selective presentation of data compounds the bias. The report buries the most balanced finding, that Americans are almost evenly split on AI’s future: 44 percent optimistic and 41 percent pessimistic. Meanwhile, it leads with the alarming figure that 69 percent of Americans believe a superintelligent AI would be “mostly harmful.”

The latter is a science-fiction hypothetical; the former reflects actual public sentiment. Choosing which number to headline is an editorial decision, not a scientific one.

Most egregiously, the report’s final section shows respondents a political ad script that claims, “Within 5 years, AI is projected to eliminate 75 percent of our jobs.” This figure has no credible empirical basis—mainstream economic research on AI and employment produces estimates nowhere near this magnitude.

Blue Rose then measures how effectively this false claim moves voters toward Democratic candidates. They are not measuring public opinion; they are optimizing disinformation. And more fundamentally, how does the so-called affordability crisis get solved without higher productivity, which necessarily means that technology eliminates some jobs and, in the process, lowers prices?

None of this means the underlying public anxieties about AI are manufactured. Economic insecurity is real, and concerns about technological displacement deserve serious policy attention.

But a poll designed from the outset to test Democratic messaging, built on leading questions and false choices, and culminating in an explicit partisan optimization exercise, is not a contribution to that serious conversation. It is a campaign tool wearing a white lab coat.

Rather than engage in this kind of anti-technology, anti-business, populist propaganda, the poll should have focused on the real issue: The frankly poor job that local, state, and federal governments do in helping workers who lose their jobs due to technology (or trade) reenter the labor market. That’s the question that matters, and one that ITIF has already addressed with a comprehensive agenda.

Yeah—UBI: universal basic income. No more worries. No more cares. No more teachers’ dirty looks. Just biweekly government checks for the rest of your life. Sign me up, Scotty.

Sometimes it’s hard not to just break out laughing at some of the harebrained ideas that so-called experts and pundits offer. UBI has to rank near the top.

UBI has been widely proposed as the solution to AI-powered robots supposedly doing all the jobs. And it’s not just the granola-eating commie hippies promoting it.

Stanford (as you would expect) has jumped on the bandwagon with its “Basic Income Lab.” The lab was founded by former Stanford professor Juliana Bidadanure, whose research focuses on “our commitment to equality” while she “diagnoses unjust inequalities.” Perhaps not surprising for someone who publishes in prestigious journals such as Studies in Marxism.

It would be one thing if this were just a quasi-Marxist academic movement, but it has gone far beyond that. The University of Pennsylvania Center for Guaranteed Income Research (yes, another one) finds that more than 30 U.S. cities have adopted UBI pilot programs.

And now, with AI supposedly about to destroy all jobs but four (the CEOs of the AI giants), UBI is being touted as the panacea to the AI “jobapocalypse.” The sad part is that this movement has gotten much of its financial support and credibility from Silicon Valley, which should know better than to fan the flames of AI fear with offers of welfare payments.

Former Facebook co-founder and funder of all sorts of anti-corporate activities, Chris Hughes, was one of the original funders of the Economic Security Project, which supports research and cultural engagement around guaranteed income and contributed millions to the Stockton, California, UBI experiment.

A recent op-ed in The Hill titled “The US is headed for mass unemployment, and no one is prepared” called for, you guessed it, UBI. But be assured the author, John Mac Ghlionn, is not some crazy Marxist. No, he writes for the New York Post and once upon a time The American Conservative (which raises the question: What has the conservative movement come to?).

Ghlionn tells us he’s a conservative who was mugged by reality: “Something fundamental has shifted, and pretending otherwise is nothing short of denial. The AI revolution is here, and it’s gutting entire sectors with hurricane force.”

Really? A hurricane of job destruction? This must explain why the rate of job loss from downsizing and closures in the first quarter of 2025 (the latest data) was the lowest since the Bureau of Labor Statistics started collecting the data in 1995. It must also explain why the unemployment rate was just 4.3 percent in January of this year, more than a percentage point lower than the 50-year average.

The sad thing is that 47 percent of the article’s readers, responding to the poll asking whether they support UBI, said they do.

Oh, but wait—the job apocalypse is coming. Really, it is. Geoffrey Hinton says so.

Well, leaving aside the myth that AI will displace all jobs (which I will address in future posts), what’s wrong with UBI?

Where to begin?

How about the fact that the longer people are out of the labor market, the longer they tend to stay out. UBI is welfare, although supporters avoid that term like the plague because welfare is stigmatized as people getting money for nothing. But who can be opposed to UBI? It’s universal. It’s basic. And it’s income.

But for many UBI supporters, being out of the labor market is the point. Why bother working, especially when you are an “oppressed proletariat,” when you can do nothing and have the Man pay for it?

I don’t know about you, but I don’t want my kids living in a Ready Player One–style world where they play video games all day while eating dried seaweed.

Rather than UBI welfare, the task, as ITIF has laid out, is to improve federal worker adjustment assistance programs.

But even if we agreed that UBI is beneficial, what’s the rush? Wake me when unemployment—in a non-recessionary quarter—exceeds 10 percent. By the way, that will not happen, and I am on record willing to bet anyone that it won’t.

If we really do see AI enabling large numbers of jobs to be automated (and according to the Congressional Budget Office that isn’t happening anytime soon), and if the lump-of-labor fallacy somehow turns out not to be a fallacy, and additional jobs are not created from the lower prices generated by AI-driven automation, it is still not clear why there would be a problem.

If AI can do all the work, then the price of everything falls toward almost nothing: A car for $50 and a haircut for 10 cents. If that is the case, and if people can cobble together 10 or 20 hours of work a year, they can live quite well.

But in any case, until we get to 10 percent unemployment, please stop bothering us with this socialist nonsense.

The Global Future Council on the Future of Growth—part of WEF’s 2023-2024 Network of Global Future Councils, which convened senior economists and thought leaders from academia, business, and government to provide “intellectual guidance on new approaches to growth”—released a report arguing that the world must “shift gears,” move out of the “slow growth lane,” and pursue a “better quality of economic growth.”

Ah, who could possibly be against that? What are you, some kind of anti-growth heathen?

The report starts by decrying that “economic growth has been uneven… leading to significant inequalities.” Well, according to the World Bank, the number of high inequality countries fell from 77 in 2000 to just 52 in 2022, the latest year with comparable data. In other words, recent global growth appears to be reducing inequality, not worsening it.

Of course, no cocktail party report can get away without the requisite hand-wringing about climate change. The WEF report criticizes the fact that only 50 countries have reduced CO₂ emissions. But it blithely ignores the fact that most countries, and the world as a whole, have moved to become significantly more carbon-efficient, with global GDP increasing much faster than CO₂ emissions.

The only way to achieve sustained declines in global greenhouse gas emissions—short of embracing “degrowth,” which would consign billions to crushing poverty—is to significantly increase government support for clean energy R&D that will reduce the cost of clean energy to at or below that of dirty fossil fuels. (Bizarrely, WEF can’t seem to make up its mind whether it considers degrowth an evil notion or a serious policy option.)

Fusion energy looks extremely promising if it works. But the idea that some new form of capitalism can solve climate change, or that countries will willingly pay more for energy to save the planet, is wishful thinking.

Even more bizarre, the Global Future Council suggests that this new capitalism would involve rich countries pouring hundreds of billions of dollars into poorer countries to help them afford expensive clean energy. All in the name of getting the entire world to embrace “green growth.” This borders on Orwellian logic. You do not get growth from spending more on something when you could spend less. That is called degrowth…

The report also calls for “bringing countries that have been left behind back onto the growth ladder,” particularly in Africa. But the kind of capitalism we have today is not the reason for slow growth in Africa, India, and many other developing economies. The causes are largely twofold.

First, China’s dominance in low-wage manufacturing has absorbed many of the opportunities these kinds of countries historically relied on to industrialize. Yet the last thing WEF will do is criticize Beijing.

Second, in most of these nations, corruption and insufficient economic governance are the primary drivers of stagnation. And let’s not forget the European Union’s ban on GMO crops, which effectively consigns large portions of African agriculture to persistently low levels of productivity.

If capitalism were truly the problem, why have certain well-governed African economies such as Botswana and Mauritius enjoyed strong productivity growth?

And, like anything “green,” any report today also has to include AI. Don’t worry, WEF does not disappoint. Artificial intelligence, we are told, is harmful because it will be used more in high-income nations, given that wages are lower in developing economies. But why is AI different from any other efficiency-enhancing process technology introduced over the past century? It is not.

While expensive automation may make less sense in low-income countries, these economies have far more low-hanging fruit available by adopting efficiency practices already common in advanced economies. These countries could reduce regulatory protection for small, informal producers, eliminate labor regulations that discourage firms from scaling, and improve logistics and infrastructure. None of this is rocket science. The barriers are corruption and bureaucracy.

Rather than focus on these problems—after all, we certainly wouldn’t want to blame the “victim” for its own policy failures—the Global Future Council report focuses on… skills. The supposed solution to everything.

But not just any skills. Get ready for it: green skills. Skills so workers can produce expensive green energy that will likely account for about 5 percent of these nations’ GDP, at most.

And of course, like any good Davos Man manifesto, the report recoils in horror from “geoeconomic fragmentation,” even though China is almost entirely to blame for it through systematic violations of both the rules and the spirit of the global trading system under the World Trade Organization.

The report closes with the following optimistic statement: “Global economic growth may have had several problems so far this century, but with not even a quarter of the 2000s behind us, we have a unique opportunity to transform it into a century of solutions.”

I disagree, but not with the notion that we have an opportunity to accelerate economic growth. Rather, I disagree with the claim that global growth has had “several problems” this century. It has not had multiple problems. It has had just one central problem: Productivity growth has been, and continues to be, too low.

That is because almost no country has a serious national productivity strategy. Instead, many nations, particularly in the EU and within the WEF policy orbit, have turned away from policies that prioritize capitalist growth. Meanwhile, many developing countries remain trapped in corruption, weak institutions, and business environments conducive to stagnation or even outright regression.

This report demonstrates the type of thinking produced when a temporary council of global elites convenes to advance “cutting-edge insights and disruptive ideas toward a balanced growth agenda.” If WEF wants to make a truly meaningful contribution, rather than attempt to rethink capitalism, it should start by articulating a serious global productivity growth agenda. What we do not need are calls for warmed-over socialism dressed up as a “cutting-edge” growth model.

CBS News MoneyWatch warns that “Corporate profits are soaring even as layoffs mount.” Quartz declares that “Big tech companies are richer than ever and Wall Street is happy. But they’re still laying off thousands of workers.”

When The Washington Post announced steep layoffs earlier this month, some attacked billionaire Jeff Bezos for not keeping those employees on. After all, if he has that much money, surely he should be willing to give it to deserving Post reporters the paper no longer needs.

Truthout said that if only evil Bezos would give $100 million to the paper, his net worth would decline from $248.7 billion to $248.6 billion. Look, you won’t get any argument from me that we should tax billionaires more, but if the paper is losing $100 million a year, why should he—or anyone—subsidize it?

You get the idea. As long as companies are not losing money, they should never lay off workers. But what if a company uses technology to produce the same output with 5 percent fewer workers? Should it keep employing those workers even though it no longer needs them?

Yes, according to the new zeitgeist in America, which sees a company’s purpose not as serving consumers through lower prices, higher quality, and innovation, but as running cushy jobs programs for workers.

They used to call this featherbedding: A labor practice where unions require employers to hire more workers than needed or maintain inefficient work rules, often to protect jobs from technology. It leads to higher costs while providing job security (and cushy work) for some members. Think of rules requiring extra crew members on trains regardless of operational need. Thankfully, Congress made that practice unlawful decades ago, and the National Labor Relations Board (NLRB) enforces the prohibition on payment for services not performed.

So how do so many people get this so wrong? The short answer is that they believe corporations have virtually unlimited profit opportunities and that every worker laid off translates directly into more profits.

This is mistaken. If one company in an industry achieves efficiencies and lays off some workers, it will initially earn higher profits—until competitors follow suit. At that point, competition kicks in and companies pass most of their savings on to consumers.

But what if they don’t? Well, that would require rewriting the fundamental laws of economics. Since 1950, U.S. labor productivity has increased approximately 299 percent—meaning the average American worker now produces roughly three times more output per hour worked—while average corporate profit margins have not trended upward over the long run. Worth pausing on.

Another way to think about this: Imagine Senator Bernie Sanders and Representative AOC get their wish, and the United States becomes a socialist economy, with most companies operating as worker-owned cooperatives. Now imagine AI arrives and allows those co-ops to produce the same output with 10 percent fewer workers. If all the co-op workers said, “hell no, we won’t go,” incomes would stagnate. No one would see declining relative prices, and living standards would flatline. Surely that can’t be what socialists want.

The same logic applies to a for-profit economy. We should want companies to shed workers they no longer need, because the lion’s share of the savings—especially over the medium term—flows through to lower prices, higher real wages, and new investment opportunities, while displaced workers move on to new jobs.

That’s how it has worked since the founding of the Republic, and there is no good reason to believe it will stop now. While future posts will detail why the AI job doomers are wrong, I’ve been making this argument for decades.

If you’re curious, peruse ITIF’s @Work Series, which houses publications dating back to 2011 examining how technological change has reshaped labor markets historically, why claims that innovation destroys more jobs than it creates are wrong, how productivity growth affects wages and employment, and what specific steps policymakers should take to reform the nation’s workforce training and employment systems. (You could also start with my most recent book, Technology Fears and Scapegoats: 40 Myths About Privacy, Jobs, AI, and Today’s Innovation Economy.)

Yes, like today’s headlines, I too write about workers, productivity, AI-driven job loss, robots, wages, and technological disruption. The difference is that I don’t traffic in alarmism or fuel public panic. I explain why the answer is not to slow innovation, but to accelerate it.

Finally, just to prove I am not a hard-hearted son of a gun—or a libertarian, or both—while I don’t believe economic organizations should be jobs programs, I do believe that government can and should do much more to help workers who have lost their jobs through no fault of their own. I have laid out such an agenda here.

Wake me if Congress ever gets around to doing anything to move that agenda forward. In the meantime, I still value growth. So, three cheers for companies that lay off workers when they genuinely no longer need them.

I don’t mean culture in the narrow sense of just books, movies, and music. I mean the overarching narratives and shared views held by society, and especially by what Michael Lind calls the managerial overclass—”the university-credentialed elite that clusters in high-income hubs and dominates government, the economy, and the culture.” It’s the scribblings and pronouncements of these folks that shape the beliefs most Americans have on many issues, including digitalization and now AI.

Unfortunately, this knowledge elite in America, as well as in Commonwealth nations and Europe, now forms a stiff collective headwind against digitalization—both against the competitive success of digital firms and against the overall process of digital transformation (i.e., the deep digitalization of most sectors of the economy and society, including through AI).

It’s hard to say when American culture turned from supportive to oppositional, but perhaps 2011, the year Steve Jobs died, is as good a demarcation point as any. Since then, the elite class narrative has transformed from one generally supportive of digital progress, or at worst neutral, to one of critique, disdain, and mockery.

Before 2011, if you wanted to be one of the “cool kids,” you waxed poetic about digital transformation, how it would spur growth and democratize information. Now, anyone seeking cocktail party acceptance or a TED Talk speaking slot must obligatorily offer one or more critiques of not just tech, but BIG TECH. If before you marveled at Moore’s Law, 3G, and Web 2.0, now you bemoan how tech is destroying democracy, eroding privacy, and killing jobs. And others nod their heads and murmur in affirmation.

The list of complaints seems endless, providing the cool kid skeptics with a panoply of causes and talking points. Indeed, elites now compete fiercely to produce the most aggressive takedown. Anti-establishment, anti-intellectual property “activist” Cory Doctorow coined the term “enshittification.” Very clever, Cory. But what about broken brains? That’s even better. Right wing commentator Matt Walsh says AI has declared “war on humanity.” Better still, we’re entering a “digital dark age.” Why not just be done with it and declare “digital: the spawn of Satan”? Kind of hard to top that one.

Let’s look at AI. Of course, according to its critics, AI is:

• Biased

• Killing jobs

• Violating privacy

• Creating security risks

• Destroying the environment

• Enabling price discrimination

• Facilitating anti-competitive collusion

• Jacking up electric rates

• Concentrating power into the hands of a few tech bros

• Flooding the internet with garbage

• Exploiting labor

• Enabling racially biased predictive policing

• Supporting digital redlining

• Creating data deserts

• Undermining learning

• Powering misinformation and disinformation

• Leading to polarization and echo chambers

• Enabling widespread manipulation

• Atrophying human capabilities

• Exacerbating economic inequality

• Deskilling professions

• Enabling theft of artists’ content

• Leading to social isolation

• Eroding trust

• Enabling avoidance of accountability

• Destroying small businesses

• Misdiagnosing medical issues

• Not accessible for the disabled

• Widening the digital divide

• Leading to financial or economic collapse

• Spurring addiction

• Limiting social development

• Atrophying critical thinking

• Limiting scientific progress through synthetic noise

• Homogenizing culture

• Enabling worker surveillance

• Leading to infrastructure dependency

• Aiding harassment and bullying

• Empowering liberals

• Empowering conservatives

• Fostering digital imperialism and colonialization

• Expanding pornography

• Disorienting people through the speed of change

• Letting corporations avoid accountability

• Powering the surveillance state

• Weakening the family

• Destroying the news business

• Making us poor

• Creating an algorithmic monoculture

• Apparently, even causing Alzheimer’s (a conference panelist once suggested this because we no longer read maps)

And of course: CREATING THE TERMINATOR so that EVERYONE will die (hopefully it spares our pets). Get your affairs in order and prepare to meet your maker.

I could easily compile a list ten times longer of the benefits of digital transformation. But why bother? ITIF and a few other pro-innovation organizations have been documenting those benefits for years. It is like spitting into the wind.

With the shift to a critical culture, evidence becomes superfluous. No one wants to be the uncool kid in the corner talking about the potential of AI adding three-tenths of a percentage point to annual productivity growth. Much better to warn that Open AI will overwhelm the electric grid. Ooooh.

As history shows, culture matters. A critical, rather than supportive, culture produces a business and entrepreneurial class that doubts itself and a society that hesitates rather than seeks faster progress. This should be obvious. If elites—including the intellectual and political classes—are not wholeheartedly behind technological progress and transformation, whether industrial or digital, progress will inevitably be more halting and less successful.

In a world where America faces intense international competition in the digital space, especially from China, this is a cultural posture we adopt at our peril.

This is a two-part blog. In the first installment, I examine the role culture played in industrial development and economic progress through England’s experience. It relies predominantly on Martin Wiener’s 2004 book, English Culture and the Decline of the Industrial Spirit, 1850-1980, which anyone interested in industrial development should read. Wiener’s heavily documented thesis is that although “England was the world’s first great industrial nation… the English have never been comfortable with industrialization,” that discomfort ultimately contributed to industrial weakness and decline.

Wiener argues that after roughly 40 or 50 years of support and enthusiasm at the dawn of English industrialization, Britain never quite seemed culturally “at home” with progress. Ultimately, this anti-industrial sentiment contributed to the decline of British industry and the “modern fading of national economic dynamism.”

England’s state of mind, like that of much of the United States today, was profoundly conservative in the sense of preserving the past while remaining skeptical of, or openly hostile to, the present and future.

According to Wiener, the English genius “was not economic or technical, but social and spiritual; it did not lie in inventing, producing or selling, but in preserving, harmonizing and normalizing.” He goes on to note that Britain’s greatest task—and achievement—lay in “taming and ‘civilizing’ the dangerous engines or progress it had unwittingly unleashed.”

English society did tame those engines, and in doing so, tamed the entrepreneurial spirits that sought to push forward and keep their country in the lead. Meanwhile, other nations, including the United States, Germany, and later Japan, got on with the task of unleashing and surged ahead.

But today, America is in the process of leashing itself. States compete to regulate first and most aggressively. Pundits rush to see who can write the harshest critique of our “digital dystopia.” Members of Congress battle to decry the harms of AI and introduce restrictive legislation.

So why did England invent the machine but then become ambivalent at best, and hostile at worst, toward industrialization? Wiener writes that “modernization has never been a simple and easy process. Wherever and whenever it has occurred, severe psychological and ideologic strains have resulted.” English elites resisted those strains, much as American elites do today. I wish “resistance is futile,” but in Britain’s case, it was not. It was effective. They made less progress and grew more feeble.

To be sure, there were a few dissenters who resisted the elite narrative. But not many. As Wiener notes, “Rarely were these canons challenged, and then only by self-possessed ‘rugged individualists’ who had a strong sense of swimming against the tide.”

Every day in America, fewer seem willing to swim against the tide. It is easier to retreat to the shore and observe—or better yet, turn to the preservation and fund massive anti-digitalization and anti-Big Tech campaigns, as so many guilt-ridden, cashed-out tech billionaires have done.

So what, you may ask? America is still the digital leader. But as Wiener reminds us, ideas have consequences. How could they possibly not? England was still the manufacturing leader as late as the 1880s and 1890s. Yet by then, English politics reflected deep ambivalence about industrial society and, in practice, helped dampen rather than stimulate industrial development. These widespread cultural values ended up discouraging “commitment to a wholehearted pursuit of economic growth,” explains Wiener.

It should therefore come as no surprise that the UK today is largely an industrial wasteland, with per-capita income roughly 30 percent lower than that of the United States. And, according to the World Happiness Report, English people are no happier for it (or than Americans, for that matter). Cultural ambivalence toward growth and industry carries long-term costs.

It is difficult to overstate the seriousness of this threat to America and the broader West. The culture of digital and AI opposition is one of two major threats to American prosperity and power, the other being the People’s Republic of China’s systematic effort to achieve global domination of national power industries.

It may be asking too much to return to unleashing progress or optimism. But unless U.S. (and allied) culture shifts at least back to neutrality, other nations unburdened by this self-doubt (even self-hatred) and digital fear will progress faster. We can expect to be outpaced and eventually surpassed, just as others once left the UK in the comfortable dust.

I can imagine the U.S. elite class 20 years from now looking at those “materialist,” shallow nations that have completely transformed their education and health care systems with AI, pitying them for losing the “human touch.” Decrying their wealth as environmentally irresponsible. Criticizing our dependence on their digital champions.

Meanwhile, we Americans will congratulate ourselves for preserving our lovely analogue world, reading paperback books, listening to vinyl records, and sending handwritten letters. Let’s hope we don’t revive fax machines, but who knows? Perhaps U.S. elites will turn to carrier pigeons. Owl mail from Harry Potter might be cool—although a “wizarding-adjacent” delivery system would likely be deemed too disruptive, too dystopian, or too innovative.

Critics, of course, defend themselves by arguing that they didn’t change; the internet did. Tim Wu, a longtime Big Tech and telecom critic, states that his new book, The Age of Extraction, “is the story of the last 20 years or so… of the dream of the internet. And then, what happened to wreck it essentially.” For Wu, “wreck” appears to mean an internet that is neither government-owned, worker-co-op-run, nor hacker-managed, yet is used daily by nearly every American and organization. For these digital purists, everything went downhill after Stewart Brand’s email system, The WELL, and the first spam message on ARPANET. Why can’t the internet be like Wikipedia and Craigslist, they ask?

But utopian techno-nurd nostalgia does not fully explain the turn to opposition. Tim and thousands of critics like him are intellectual descendants of the 1960s anti-establishment ethos: If it’s establishment, they’re against it. When Apple was the upstart challenging “Big Brother” IBM, it was cool. Now Apple is evil. When Google was taking on Bill Gates and the Microsoft monopoly, it was cool. Now it’s evil. When OpenAI first challenged Google, it too was cool. Now it is rapidly morphing into the next evil villain. It’s strange how many establishment elites cling to a prideful posture of adolescent anti-establishmentism.

And let’s not forget, Wu wants to be one of the cool kids. Who wouldn’t? Unless, of course, you care more about truth than popularity. If Tim wrote a book called “The Age of Prosperity” rather than The Age of Extraction, it would be met with yawns, not op-eds in The New York Times or The Guardian.

Now multiply this dynamic 10,000 times, across thousands of influential voices eager to join the cool kids club of digital opposition, and you get America’s (and the West’s) corrosive digital culture. In some respects, if one can believe it, Canada, the UK, Australia, and most of Europe are even worse off. These allied nations may be even further down this path, as they rail against both digitalization and American tech—which might help explain their lagging digital productivity growth relative to the United States.

That said, none of this fully explains the rise of an anti-digitalization culture over the last 15 or so years. Perhaps the most compelling explanation is America’s increasing selfishness—what Christopher Lasch termed “the culture of narcissism.” This orientation, which had been brewing since the self-absorption of the 1960s, emerged in full force in the 2010s.

In this mindset, everything is judged not by its collective contribution—what it does for the community or nation, since collective benefits are now dismissed as serving only wealthy elites and powerful corporations—but by its impact on the individual’s narrow self-interests, often in the role of victim rather than citizen.

The long list above of critics about AI reflects this. Is AI going to take my job? Who cares about societal productivity? Is AI going to harm my privacy? Who cares about data innovation? Is AI going to jack up my electric bill? Who cares if AI can make low-income communities safer?

There has almost never been a transformative technology that did not carry risks or cause harm. Automobiles kill people. Electricity causes house fires. Chemicals can cause cancer. Yet earlier generations balanced risk with ambition. Americans had courage and a communitarian spirit, accepting trade-offs in pursuit of national prosperity and progress. They rushed toward technological innovation rather than retreating to the barricades. As Robert Frost put it, “And that has made all the difference.” Today we have cowardice and selfishness, and we rush toward stopping digital innovation.

I wish I could be more optimistic that America will avoid the long, downward path England took. To be sure, the United Kingdom is richer and more technologically advanced than it was 75 years ago. But relative to its peers, it’s a shell of what it should be, underperforming its potential. Unless extremists seize control, which remains possible, the U.S. economy will continue to grow and advance technologically.

But without a fundamental shift in culture, America will gradually decline relative to other nations, ceding leadership. One could easily imagine a world in 2075 where China and India dominate advanced digital industries while the United States is a “pleasant country” with a mid-tier global economy and some “quaint ways.” Those who are 30 years old today will be entering their 80s, looking at their buddies and saying, “Ah, remember when?”

I have no desire to live in that country—one defined by animosity toward technology, fear of innovation, analogue envy, and the techno-economic stagnation that accompanies such attitudes. That is not the America I moved to as a boy from Canada. That is not the America I want for my two children and two grandchildren.

It is late in the game, but it is still not too late to overturn digital pessimism and hostility and recognize them as fundamentally misguided. As Wiener observed of England, it will require many more self-possessed “rugged individualists” willing to swim against the anti-digital tide.

Who wants to join me? The water’s great.

It’s hard to say exactly when the culture turned from supportive to oppositional, but perhaps 2011, the year Steve Jobs died, is as good a turning point as any. Since then, the U.S. elite narrative, long one of digital enthusiasm and interest, has shifted largely toward digital skepticism and critique.

As history shows, culture matters. A critical, rather than supportive, culture produces a business class that doubts itself and a society that hesitates rather than seeks faster progress. This should be obvious. If elites—including the intellectual and political classes—are not wholeheartedly behind technological progress and transformation, whether industrial or digital, progress will inevitably be more halting and less successful. In a world where America faces intense international competition in the digital space, this is a cultural posture we can ill afford.

This is a two-part blog. This first installment examines the role culture played in industrial development through the experience of England. It relies predominantly on Martin Wiener’s 2004 book, English Culture and the Decline of the Industrial Spirit, 1850-1980, which anyone interested in industrial development should read.

Wiener’s heavily documented thesis is that although “England was the world’s first great industrial nation… the English have never been comfortable with industrialization,” that discomfort ultimately contributed to industrial weakness and decline.

I argue in the second blog that the same dynamic is now playing out in the United States with respect to digitalization.

Wiener argues that notwithstanding the first 40 or 50 years of English industrialization, Britain never quite seemed culturally “at home” with industry. Over time, these anti-industrial views contributed to the decline of British industry and the “modern fading of national economic dynamism.”

England’s state of mind, like that of much of the United States today, was profoundly conservative in the sense of preserving the past while remaining skeptical of, or openly hostile to, the present and future.

Ralf Dahrendorf, the German-born director of the London School of Economics and Political Science from 1974 to 1984, concluded that “an effective economic strategy for Britain will have to begin in the cultural sphere.” The same is true for the United States today.

Wiener argues that “for a long time, the English have not felt comfortable with ‘progress.’” He states:

The English nation even became ill at ease enough with its prodigal prodigy to deny its legitimacy by adopting a conception of Englishness that virtually excluded industrialization… In the later years of Victoria’s reign, they came to form a complex, entrenched culture syndrome, pervading ‘educated opinion’. The idealization of material growth and technological innovation that had been emerging received a check, and was more and more pushed back by the contrary ideals of stability, tranquility, closeness to the past and ‘nonmaterialism’.

He goes on to note that the English genius “was not economic or technical, but social and spiritual; it did not lie in inventing, producing or selling, but in preserving, harmonizing and normalizing.” According to Wiener, Britain’s greatest task—and achievement—lay in “taming and ‘civilizing’ the dangerous engines or progress it had unwittingly unleashed.”

England did this while other nations, including the United States, Germany, and Japan, got on with the task of unleashing. Indeed, Wiener points out that “even those nostalgic for the rural past in America rarely disdained manufacturing and progress.”

As one English scholar wrote in 1976, “In West Germany neither making money nor making three-dimensional artifacts are culturally dubious activities.” Today, by contrast, America’s elites are nostalgic. They increasingly romanticize an analog past.

So why did England invent the machine but then become ambivalent at best—and hostile at worst—toward industrialization? Wiener writes that “modernization has never been a simple and easy process. Wherever and whenever it has occurred, severe psychological and ideologic strains have resulted.” English elites resisted those strains, much as American elites do today.

Part of this resistance took the form of the aristocratic landed elite absorbing the new industrial bourgeoisie. Indeed, a mark of success for a wealthy factory owner was often to retire and buy or build a large estate in the country. Wiener explains that “the consolidation of a ‘gentrified’ bourgeois culture” meant that economists, journalists, civil servants, and even political leaders increasingly held sentiments and ideals that restrained rather than stimulated economic growth.

As early as the 1820s, John Stuart Mill set the tone, describing industrialists as “the very classes of persons you would pick out as the most remarkable for a narrow and bigoted understanding and a stunted and contracted disposition as respects all things wider than their businesses and families.”

Even at the relative height of England’s industrial revolution—symbolized by the construction of the Crystal Palace in Hyde Park for the Great Exhibition of 1851—the reaction was mixed at best. Much like today’s digital skeptics:

• Social critic John Ruskin dismissed industrialization as nothing but “noise, emptiness, and idiocy.”

• Rudyard Kipling famously refused to install a telephone in his country estate.

• According to George Bernard Shaw, Charles Dickens thought the industrial system was “horrible.”

• Historian Arnold Toynbee called English industrialization “a period as disastrous and as terrible as any through which a nation ever passed.”

And, of course, this hostility toward industrialization extended naturally into contempt for America. British philosopher Herbert Spencer, who laid the groundwork for Social Darwinism, wrote that “the American is less happy,” and that existing and future generations of Americans “are and will be essentially sacrificed.”

Wiener quotes a widely read left-wing intellectual writing in 1926 that “the English dislike America for the American worship of size, speed, mechanism, and money.” As Wiener observes, America was seen as offering the least resistance to the dehumanizing tendencies of modernity; it had “sold its soul” to industrialization. It also created a mass middle class in the process.

In the minds of the British, America became—to borrow Tolkien’s imagery—Mordor, while England was “the Shire.”

Even England’s leading economists, not unlike some today in the United States (e.g., Nobel laureate Daron Acemoglu), were ambivalent toward industrial growth. Alfred Marshall hoped for a society in which social order would surpass the present through “the subordination of material possessions to human well-being.” John Maynard Keynes was “not a great friend of the profit motive.”

As Wiener explains, these economists, along with Treasury and other government officials, similarly attached “a low priority to the increase of production and the pursuit of material gain.” One UK Treasury official warned in 1960 that economic advance was disruptive, and that economic change itself was “evil.” It is therefore no surprise that the anti-growth guru of the 1960s, E. F. Schumacher, was an English economist. (Schumacher’s “small is beautiful” doctrine would later inspire the title of my 2018 book, Big Is Beautiful: Debunking the Myth of Small Business.)

These views were also reflected in British politicians and leadership:

• Conservative Prime Minister Stanley Baldwin saw himself as a representative of “those far-off days before acceleration was regarded as a manifestation of civilization.”

• Lord Halifax sought to shift agriculture away from efficiency and toward a vision in which more English workers could return to the farm and leave the urban factory behind.

• Liberal leader Sir Edward Grey wrote, “I took things as I found them and for 30 years spoke of progress as an enlargement of the Victorian industrial age—as if anything could be good that led to telephones and cinematographs and large cities and the Daily Mail.”

As Wiener concludes, after World War I, government and politics in England became permeated by a mentality that regarded industry as a necessary evil and innovation and competition as risky and faintly disreputable.

Sounding strikingly like today’s “family-first” national conservatives in the United States, the UK Conservative Party’s official 1949 platform declared:

Conservatism proclaims the inability of purely materialist philosophies to read the riddle of life, and the necessity of subordinating scientific invention and economic progress to the needs of the human spirit.

The socialists of the time were no better, lamenting that “the world is growing ever blacker, uglier, noisier, and more meaningless,” and insisting there was still time to “turn back.” Even England’s unions were ambivalent about industrial growth, decrying their organized American brothers and sisters and criticizing them as “too materialist in their aims.”

There were, of course, a few dissenters who resisted the elite narrative. As Wiener notes, “Rarely were these canons challenged, and then only by self-possessed ‘rugged individualists’ who had a strong sense of swimming against the tide.”

Other nations did not suffer from this pathology. America certainly did not. Nor did the Asian Tigers after the 1950s. Germany did not either.

As Wiener reminds us, ideas have consequences. How could they possibly not? English politics reflected widespread ambivalence toward industrial society and, in practice, dampened rather than stimulated industrial development. He writes that these cultural values ultimately “discouraged commitment to a wholehearted pursuit of economic growth.”

It should therefore come as no surprise that the UK today is largely an industrial wasteland, with per-capita income roughly 30 percent lower than that of the United States and, according to the World Happiness Report, no happier for it—or than Americans, for that matter.

Culture matters.

We are unfortunately approaching that point with the idea that it is time to let Chinese companies, especially EV and battery makers, have tariff-free access to the U.S. market if they produce their products here. Let’s be clear: This would be the final nail in the coffin of U.S. manufacturing.

The current iteration of the idea is to encourage Chinese EV and battery makers to build factories in America, following the model of many Taiwanese, Japanese, Korean, and European firms that already operate facilities here across a range of industries. Proponents believe that this would reduce the massive trade deficit and create manufacturing jobs.

But this is an idea that needs to be smothered in its intellectual cradle.

To be sure, if the choice is between importing Chinese goods and having them made in the United States, the latter is more tolerable. But that should not be the choice. That framing ignores the fact that other options exist and that some are already in place.

For example, in the case of Chinese EVs, why not just continue with the 100 percent tariffs? Allowing BYD or another Chinese automaker to open a factory in the United States wouldn’t create any net new American manufacturing jobs (vehicle demand is finite). It would simply shift vehicle-manufacturing jobs to Chinese-owned companies. The same is true for most Chinese imports, especially products already made in the United States, such as semiconductors, pharmaceuticals, and machine tools.

Doing so would mean reduced domestic firm capabilities. To use the auto example, letting Chinese firms produce here could very well lead to the bankruptcy of one of the Big Three. If not bankruptcy, then at minimum mass layoffs across all three companies.

Predictably, globalists will argue that tariffs are bad, especially on planet-saving products like EVs and batteries. I agree: Tariffs on most of our allies—at least ones that are higher than what they impose on U.S. exports—are not good. But China is a whole different kettle of fish.

China is the kryptonite of the global trading order and the WTO. Massive subsidies, closed domestic markets, standards manipulation, and IP theft are hallmarks of the CCP’s system. Why should the West reward such predatory practices with market access?

But okay, set all that aside. What if policymakers ignore these transgressions and, in the name of free trade and international comity—”it is critical that Trump and Xi cooperate”—remove the tariffs, or at least lower them to the so-called Liberation Day base rate of 10 percent? Then the choice does become one between imports from China and Chinese production in America.

At first glance, having the Chinese producer here might seem better, assuming the Chinese share of the U.S. market remains the same under imports versus domestic production. But that assumption is unlikely to hold true. Producing here could very well give Chinese firms a larger share of the American market, given their ability to gain tacit, ground-level knowledge of U.S. industries and consumer behavior.

But even if market share were identical under imports versus domestic production, there are still good reasons to oppose the latter. Unlike American-produced cars and some of those made by foreign automakers, a substantial share of the value added in vehicles is generated in the United States (or at least in North America). That would likely not be the case with Chinese companies, whether in autos, batteries, or other advanced-tech industries.

Much of the highest value-added work, including R&D, engineering, and the most complex production processes, would likely remain in China. Reducing the market share of U.S. firms would therefore mean fewer design, R&D, and advanced engineering jobs, as well as reduced innovation output, in the United States.

In addition, even assuming all cyber risks could be fully addressed—no remote shutdowns or CCP-directed tracking—China would still gain greater control over the U.S. economy. Unlike any other country in the world, the CCP can tell its firms to jump, and they ask, “How high?”

It is one thing to encourage our allies to build factories on American soil; that is far better than continued imports. For decades, international automakers like Toyota, Honda, and BMW have invested in U.S. operations, building full-scale production factories—and that’s a good thing. Foreign firms in other advanced industries, such as Samsung and TSMC, are expanding their manufacturing footprints in the United States, building cutting-edge facilities—and that, too, is a good thing.

But that is fundamentally different from allowing China to do the same. Our allies, including Korea, Japan, Germany, and others, are well-established allies. To be sure, President Trump’s protectionist actions have unsettled some allied leaders, and recent rhetoric at Davos has exposed real friction within the Western alliance. But these countries remain durable market democracies with long-term interests more closely aligned with the United States than with the CCP. Their strength still reinforces overall allied techno-industrial power vis-à-vis Beijing.

Allowing Chinese factories in the United States would largely displace American firms’ market share, hollow out domestic capabilities, and create new strategic dependencies—if not all three at once.

Even more troubling, however, is what this new, increasingly fashionable idea says about the overall state of U.S. techno-economic development. There is a long tradition in regional economics and economic geography focused on the spatial organization of production. Originally put forth in 1960 by economist Raymond Vernon and refined nearly 20 years later by economic geographers John Rees and R.D. Norton, this framework holds that advanced regions and nations specialize in early-stage product-cycle activities, such as R&D, engineering, and prototype production, coupled with continuous innovation. Lagging regions and nations, by contrast, depend largely on attracting commodity-production branch plants after products and production processes have reached some level of maturity.

For example, when personal computers were first being introduced in the 1980s and early 1990s, more of them were made in the United States, in part because designs were constantly changing and required close interaction among design, engineering, and production. But as PC technology matured—still evolving, but more incrementally, with process technology relatively stable—production could be moved offshore with relatively little impact on innovation.

This core-periphery distinction, based on production-cycle stage, characterized state and local economic development strategy in the United States from the 1930s through the 1990s. Higher-cost Northeast and Midwest states were home to most advanced production activities, while lower-cost Southern, Southwestern, and Mountain states specialized in recruiting manufacturing factories from established industrial cores: a practice called “smokestack chasing.”

That dynamic began to change fundamentally with NAFTA in 1994 and then accelerated with permanent normal trade relations (PNTR) with China in 2000. U.S. companies increasingly moved routinized production not to the Southeast United States, but to Southeast Asia and just south of the U.S. border. At one level, this might have been fine if two conditions had held: (1) the United States ran roughly balanced trade, replacing lost factories with new advanced, export-oriented production at home; and (2) it continued to move up the value chain, capturing the lion’s share of innovation-based production activity.

Needless to say, that failed to happen. China, Mexico, and other low-cost competitors contributed to a sharp decline in U.S. manufacturing and a widening trade deficit. Worse still, China has made substantial gains in advanced industries, to the detriment of the United States as a whole. Of course, a few regions—Silicon Valley, Boston, Seattle, and San Diego—retain strong innovation ecosystems, but much of the country has weakened. The “Rust Belt” effectively became a “Rust Nation.”

The reason for this background is simple. With today’s renewed push, including by the Trump administration, to induce other countries to build in the United States, it appears the country has come full circle.

Once the world’s leading industrial core for early-stage product-cycle innovation and advanced technology generation, the United States now risks sliding into the periphery. Instead of behaving as the U.S. Northeast and Midwest once did, it risks behaving as the Southern, Southwestern, and Mountain regions did: begging, bribing, and threatening foreign companies to build factories on U.S. soil.

In their defense, advocates of allowing Chinese factories across America argue that this is necessary, claiming that such exposure will shock U.S. companies out of their lethargy, “forcing them to compete.” Blogger Noah Smith makes this case by citing a study by Bloom et al.; as Smith summarizes it, while the “First China Shock hurt European profits and workers alike, it also increased innovation and productivity among European producers.”

First, having recently spoken at the Society of Automotive Engineers’ annual conference, I can say with confidence that the American auto industry, including foreign transplants, is already scared witless of Chinese firms. They are not sitting back thinking, “Oh, this is great. Let’s take a nap because the Chinese ain’t selling here.” To believe that is just silly. Competition among existing firms is already intense.

Second, had Smith bothered to review the literature fully, rather than cherry-picking a study that supported his fashionable new idea, he would have found that the Bloom study was subsequently and firmly rebutted. A 2019 scholarly journal study by Campbell and Mau found the opposite result, consistent with most research on impacts on firms in the United States. Campbell and Mau concluded:

[T]he apparent positive impact of Chinese competition on European patenting [that Bloom et al. found] disappears once one controls for richer sectoral trends, the lagged level of patents, or switches to Chinese import penetration instead of the Chinese share of imports … Thus, we believe we have partially solved the puzzle of why the rise of China ostensibly had a negative impact on patents in the US (or, others have found no impact on R&D for the US), but a positive impact in Europe—the latter results appear to be spurious.

Indeed, they found that “when controlling for lagged patents and outsourcing, and using Chinese penetration, one is more likely to get negative and significant coefficients.”

Smith’s claim is a bit like arguing that the New England Patriots need to play not only the Seattle Seahawks to stay motivated (the equivalent of today’s already intense competitive environment in most industries), but also a team whose players are on mega steroids, wield brass knuckles, and never get called for holding.

In summary, some foreign greenfield investment can strengthen U.S. techno-economic power. But it cannot substitute for domestic firm creation, expansion, or innovation. As such, what the United States needs is a robust, sophisticated national techno-industrial strategy, one that restores America as a global core region for innovation and advanced production, rather than a peripheral region dependent on investment decisions made in Beijing or elsewhere.

ITIF’s Hamilton Center on Industrial Strategy is producing a special research series examining China’s predatory industrial strategies, their impact on U.S. technological leadership, and the policy framework needed to strengthen America’s “national power industries”—advanced, traded-sector industries critical to economic strength and national security. ITIF will publish new reports in this series throughout 2026, many focused on concrete policy reforms across areas such as business financing, STEM research, budget policy, and regulation, aimed at rebuilding U.S. techno-economic strength and competing effectively with China.

Davos this week made that unmistakably clear. Canadian Prime Minister Mark Carney led the way with a blistering attack on the United States:

Over the past two decades, a series of crises in finance, health, energy and geopolitics have laid bare the risks of extreme global integration. But more recently, great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited. You cannot live within the lie of mutual benefit through integration, when integration becomes the source of your subordination.

It was a truly astounding speech, revealing not only weakness, but a willingness to abandon the alliance at the first sign of friction. Don’t be fooled by the absence of the word “America.” The target of his ire was unmistakable.

Carney spoke of health as a risk to global integration. Could he possibly mean the COVID virus that likely escaped from a Chinese government laboratory, and whose officials actively suppressed and obscured information about its spread? No, no mention of that.

He warned of financial infrastructure as a form of coercion. Was he possibly referring to U.S. sanctions on Russia for invading Ukraine, sanctions that imposed real costs on the United States itself? No.

He spoke of supply chains as tools of exploitation. Was he calling out China’s decade-long weaponization of rare earths? Again, no.

Instead, all arrows pointed toward the newly designated “main enemy”: Trump and the USA.

Finally, tariffs as weapons. There is plenty to criticize about Trump’s tariffs, as ITIF has repeatedly done. But Carney, and many other alliance leaders at Davos, conveniently ignored a central fact: For decades, the United States served as the world’s consumer market, running massive trade deficits and hollowing out its own manufacturing base. Much of this was driven by foreign protectionism, compounded by the fact that the dollar serves as the world’s reserve currency, a status that significantly benefits foreign exporters.

PM Carney also failed to mention that Canada thrived under a past system it knew how to exploit with impunity. Canada has long appeared on the USTR’s Special 301 Report Watch List for weak intellectual property enforcement. It limits U.S. audio-video imports and imposes a digital services tax targeting U.S. firms. It maintains closed markets in dairy, aerospace, and banking, and restricts U.S. seed imports. Canada subsidizes lumber exports and runs a persistent trade surplus with the United States.

So please, spare us the lectures about American unfairness.

Canada praises the old system because it knew how to manipulate it to the advantage of Canadian producers. Oh, and on top of that, Mr. Carney knows perfectly well that Canada could have secured the same 10 percent tariff deal the United Kingdom got had it been willing to make modest concessions. But no, instead he chose the well-worn victim narrative against the big, bad Yanks.

Indeed, most purported allies are now tripping over themselves to cut deals with the Chinese Communist Party. The Western alliance be damned!

• Last week, Carney struck an unbelievably questionable deal with Xi Jinping to allow Chinese EV exports to Canada in exchange for Canadian canola.

• French President Emmanuel Macron flew to Beijing to beg for more trade and investment.

• Likewise, German Chancellor Friedrich Merz is expected to visit China next month to discuss “bilateral relations.”

• UK Prime Minister Keir Starmer refused to prosecute CCP spies in his government, fearing it would alienate Beijing. Starmer even floated a revived “golden era” of trade relations with China, contingent on allowing China to build a massive embassy in London, while castigating Conservative predecessors for insufficient kowtowing.

These “leaders” are not partners; they are supplicants, hoping Xi will refrain from punishing their countries and perhaps allow them to sell a few more goods in China, even as China eats their domestic industries alive.

Only Japan—and its new prime minister, Sanae Takaichi—has shown genuine backbone, demonstrating a willingness to stand up to the CCP, particularly in defending the South China Sea. Perhaps proximity provides clarity. After thousands of years beside China, Japan seems to understand Chinese imperial ambition when it sees it.

So how do we explain this abandonment of the alliance and the kowtowing to China? Are countries really just chasing a few yuan?

After World War II, the concept of “the West” referred to an alliance led by the United States and joined by Japan, South Korea, the Commonwealth nations, and Western Europe. Internally, the alliance was bound by shared commitments to markets and democracy, underwritten by U.S. economic and trade sacrifice to keep allied countries committed. Externally, the threat of Soviet expansionism and totalitarianism kept wavering partners aligned.

The collapse of the Soviet Union appeared to remove that external glue. Instead of confronting the reality of a new cold war with the PRC—a notion the global elite has long vociferously rejected—the majority of the elite embraced a utopian globalization. That same worldview later manifested in the claim that, to the extent a cold war existed at all, it was Trump’s fault.

Following Francis Fukuyama’s vision, they came to believe we reached the “end of history.” Market democracy was assumed to be the inevitable future, even for China. The world, they believed, was converging. As a result, the threat was no longer Marxist-Leninist authoritarianism. The biggest challenges were said to be climate change, racism, and U.S. militarism.

Then Trump entered the scene. In his first term, he withdrew from the Paris Climate Accords. On the first day of his second term, he made clear that “America First” applied to trade policy as well, refusing to tolerate the protectionist nonsense so many nations (including U.S. allies) have long used to inflate the U.S. trade deficit.

So, if your goal is global integration, fewer borders, open trade, and stringent CO₂ limits, Trump is the Antichrist. Xi, by contrast, is merely a statesman who says the right things—just another global leader who professes support for climate action, globalization, frictionless trade, and non-militarism.

Never mind the man behind the curtain, Xi, who says that China’s rise has “significantly shifted the worldwide historical evolution of the contest between the two different ideologies and social systems of socialism and capitalism in a way that favors socialism.” Or that China represents a “great struggle” and “systems contest” with Western capitalist democracy.

No, to the extent those inconvenient words are even heard, they are dismissed as propaganda meant to keep the masses engaged. After all, the real “truth” about the PRC is found at Davos, where CCP speeches are carefully crafted to soothe audiences and lull them into complacency.

If Trump knows how to alienate audiences, the PRC knows how to seduce them. Last year at Davos, naturally, Chinese Vice Premier Ding Xuexiang delivered exactly what the globalists wanted to hear:

First, we need to jointly promote a universally beneficial and inclusive economic globalization. Economic globalization is an inherent requirement for the development of productive forces, and an inevitable result of technological advancement.

Translation: Ignore China’s systematic undermining of the WTO to gain unfair and predatory advantages since joining it in 2001.

Second, we need to jointly uphold and practice true multilateralism.

Translation: The United States should stop defending its allies, while China reserves the right to continue backing Russia’s war in Ukraine.

Third, we need to jointly foster new drivers and strengths for global economic development… We should seize and make the most of these opportunities to promote international cooperation on scientific and technological innovation.

Translation: The CCP, which already disguises illicit technology transfer as “collaboration,” would greatly welcome access to sensitive industrial and defense technologies held by foreign governments and firms.

Don’t worry, Xuexiang saved the best for last. The closer:

Fourth, we need to jointly tackle major global challenges.

Oh, how the Davos Man swooned. Apparently unbothered by the fact that China’s coal-fired power plant construction just hit a ten-year high.

We have been here before. Alliances collapse.

Consider the Holy League (1571–1573), an alliance of Christian Mediterranean states, including Spain, Venice, the Papal States, Genoa, and others, united against the Ottoman Empire. The alliance achieved a spectacular victory at the Battle of Lepanto in 1571, one of history’s greatest naval battles. Yet within two years, it disintegrated—not because of defeat, but because of diverging priorities. Venice sought to protect its eastern Mediterranean trade routes. Spain focused on the western Mediterranean and became increasingly consumed by rebellions in the Netherlands. The Papal States pursued a broader religious crusade.

In 1573, Venice chose trade over solidarity, unilaterally making peace with the Ottomans to preserve its commercial interests. Spain was furious but too preoccupied to continue alone. The remaining members simply drifted away.

Welcome to today.

U.S. voters, exhausted by bearing the burdens of global leadership while so-called allies ran massive surpluses and free-rode on American security, elected Donald Trump—twice. Naturally, he then went to Davos. This year in particular, he arrived with a relatively simple message: Enough. Cut the nonsense, or you’re on your own.

The reality is that America did bear the burden. It defended Europe, Japan, and Korea from the threat of communism. And now those same allies run to align with a Marxist-Leninist adversary so they can sell a few more commodities, even if hollowing out their auto industries is part of the bargain (cough, cough, Canada).

Rather than rebuild the alliance under new and “palatable” leadership, today’s Western “leaders” collapsed like a house of cards at the first sign of trouble. They now publicly denounce America and sprint to Beijing, all while refusing to bear the burden of defending democracy themselves—because, apparently, that would require too much blood and treasure.

Let the Yanks bleed and pay, even as we insult and undermine them for doing it. And while we’re at it, let’s double down on technology protectionism. Let’s impose so-called “technology sovereignty” measures against U.S. firms; they deserve it, even if doing so only strengthens China.

In the Davos worldview, we are all simply humans. If there are any divisions, they are not between countries, but between the capitalist West and the rest of the world. And now, seemingly, between the evil, vulgar Trump and the enlightened, polite, and diplomatic global elite.

But if the globalists are wrong, and China is in fact seeking global hegemony—imposing its rules on the world, silencing criticism, and restructuring the international economy for its own benefit—then this is a true tragedy.

In that case, 2026 will be remembered as the year the West lost and China won. Because without a strong alliance, there is no way to constrain China’s techno-economic war against the West. No way to limit unfairly produced Chinese imports, protect sensitive technological exports, or build advanced industries together. There is no partnership strong enough to help the rest of the world resist the siren song of Beijing’s development model.

Perhaps Davos Man is right. Perhaps we are moving toward a wonderful, happy world—if only America would behave itself. Alas, I fear otherwise.

Even if a pragmatic, pro-alliance president takes U.S. office in 2029, the damage may be irreversible. Many U.S. allies have already moved on, their feelings hurt and their pride bruised. By 2029, China will be deeply embedded, giving the CCP greater leverage to ensure that any foreign leader who has a change of heart thinks twice about rejoining the Western alliance. Leverage, once gained, is rarely surrendered.

Maybe the Western alliance was doomed all along. America’s techno-economic and trade vulnerabilities, many of them caused by our “allies’” unfair trade practices and then exacerbated by decades of free-riding, made it almost inevitable that the United States would elect a nationalist, protectionist president.

And even if American politics could somehow have avoided that outcome, the reality is that many of our allies have long been fickle, anything but Churchillian. Winston Churchill famously proclaimed, at the darkest hour of the fight against the Nazis:

We shall go forward together. The road upwards is stony. There are upon our journey dark and dangerous valleys through which we have to make and fight our way. But it is sure and certain that if we persevere – and we shall persevere – we shall come through these dark and dangerous valleys into a sunlight broader and more genial and more lasting than mankind has ever known.

Western leaders today are more likely to say something along the lines of: “We shall go forward on our own. The road is smooth and traveled with pollution-free Chinese EVs. We shall try to persevere—but maybe we won’t. And most importantly, we will come through these dark and dangerous American valleys into a sunlit future powered by globalization, few borders, and our benevolent Chinese overlords.”

Finally, Western college students, especially in Europe, have long been fed a steady stream of propaganda holding that the Western liberal democratic system is not merely imperfect, but fundamentally evil. That mindset clearly extends beyond universities.

Many leaders in Europe, with perhaps the exception of Italian Prime Minister Giorgia Meloni, appear to have embraced a cultural relativism that treats Western values and traditions as not worth defending, or worse, as worthy of attack. Say what you want about Trump, but he does not accept this postmodern worldview.

The depth and longevity of this cultural erosion is visible in public attitudes. A 2011 Pew survey asked respondents in France, Germany, Spain, the United Kingdom, and the United States whether they agreed with the statement, “Our people are not perfect, but our culture is superior.” Just 20 percent of 30- to 49-year-olds in France and Spain agreed, compared to 44 percent in the United States.

These attitudes are indicative of what Benedict Beckeld calls “oikophobia,” the fear or hatred of one’s own home, society, or civilization. In such an environment, affirming confidence in Western values is treated less as civic pride than as moral transgression, with real costs enforced through the threat of being “canceled.” It should therefore come as no surprise that leaders who say, or truly believe, that the PRC’s authoritarian system is just as legitimate as their own are unwilling to robustly defend their own.

God help us. And let us hope that democratic India grows strong, powerful, and quickly.

If I had been less polite, I would have blurted out, “Are you out of your damn mind?” I would have then followed up with three questions—none of which would have been polite either, but all of which would have been deadly serious given today’s daunting reality:

1. Do you not see that it is the Chinese Communist Party, not America, that seeks global techno-economic hegemony?

2. Are you unaware that the EU’s industrial base, chemicals, vehicles, machine tools, and the like, is far more vulnerable to Chinese techno-economic coercion than America’s?

3. Do you not realize that you are playing directly into Beijing’s divide-and-conquer strategy?

But all I actually said was, “Why are you including America? We are capitalists—we’d sell you the leverage you intend to use against us.” Alas, my pleas fell on deaf ears.

The Draghi Report, and the EU more broadly, settled into the trap of seeing the United States as the “main enemy,” to use Mao’s term. In particular, U.S. multinationals, especially technology firms, are cast in that role. Defenders of the Draghi Report will deny this, but the evidence is there in black and white (not to mention what you can glean by reading between the lines).

For example, on page 7, the report states: “These dependencies are often two-way—for example, China relies on the EU to absorb its industrial overcapacity—but other major economies like the U.S. are actively trying to disentangle themselves. If the EU does not act, we risk being vulnerable to coercion.” Note the phrasing. Not vulnerable to coercion from China, but implicitly from both China and the United States.

The report continues on page 34: “For reasons of European sovereignty, the EU should ensure that it has a competitive domestic industry that can meet the demand for ‘sovereign cloud’ solutions,” explicitly positioning these efforts against U.S. providers. On page 57, it adds: “The EU relies on foreign countries for over 80% of digital products, services, infrastructure, and intellectual property,” the overwhelming share of which comes from the United States.

The EU is far from alone in seeing the United States and American technology firms as principal enemies. A growing number of countries have ramped up aggressive efforts to constrain U.S. multinationals within their borders. These include Australia, Brazil, Canada, India, Indonesia, South Africa, South Korea, the United Kingdom, and many others.

ITIF’s Big Tech Policy Tracker documents a list of policy assaults that disproportionately target leading U.S. technology firms with restrictive or extractive rules, reducing their ability to innovate while conveniently advantaging Chinese competitors.

Flying under the cover of supposedly legitimate public policy concerns, these actions should be understood for what they are: nationalist attacks on American economic power. Congress and the Trump administration need to stand up to these governments and say, clearly and unequivocally: “Enough is enough. Continue down this path, and the United States will retaliate.”

A Familiar Pattern: How Nations Have Long Sought to Constrain U.S. Multinationals

To be sure, none of this is new. What is new is the intensity of the backlash and the fact that it is now consistently aimed at America’s most strategic and cutting-edge industries.

In each wave of U.S. industrial leadership and multinational expansion, other nations have fought back, rejecting and attacking American firms for blatantly protectionist reasons.

Developing Nations

Latin America was at the forefront of opposition to U.S. corporate power. The region had long experience with American firms dominating key sectors of its economy, such as agriculture, mining, and oil. And because of domestic mismanagement and corruption, many countries failed to develop competitive homegrown industries. So, riding the intellectual wave of Marxist dependency theory, economists such as Raúl Prebisch argued that multinational corporations perpetuated underdevelopment by extracting wealth and creating dependent economies. In other words, that they practiced imperialism.

Mexico nationalized U.S. oil companies in 1938. Guatemala pursued land reforms targeting United Fruit Company holdings in the early 1950s.

Newly independent African nations in the 1960s likewise viewed multinational corporations with suspicion, seeing them as extensions of colonial control. Ghana under Kwame Nkrumah, for example, pursued policies to limit foreign corporate influence and emphasize economic self-sufficiency.

India developed one of the most comprehensive regulatory frameworks to control foreign multinationals, rooted in its commitment to socialist-inspired economic planning after independence in 1947. The Foreign Exchange Regulation Act of 1973 and subsequent regulations required foreign firms to seek government approval for investments and often mandated majority Indian ownership.

India’s government prioritized domestic industrial development over foreign investment. The pharmaceutical sector became a deliberate flashpoint under the Indian Patent Act of 1970, which refused to recognize product patents for drugs, permitting only process patents, and enabled domestic firms to reverse-engineer medicines cheaply. India largely maintains this approach today.

By the late 1960s, developing nations coordinated their opposition through the United Nations Conference on Trade and Development (UNCTAD) and the Group of 77, advocating a “New International Economic Order” designed to regulate multinational corporations and give developing countries greater control over resources and development paths.

As Julius Nyerere, former president of Tanzania, put it bluntly in his address to the Fourth Ministerial Meeting of the Group of 77 in early 1979:

Each of our economies has developed as a by-product and a subsidiary of development in the industrialized North… The object is to complete the liberation of the Third World countries from external domination. That is the basic meaning of the New International Economic Order.

Developed Nations

But it wasn’t just the developing world that succumbed to the siren song of Marxist dependency theory. Advanced economies joined in as well.

Western European nations expressed deep anxiety about American corporate dominance. France under Charles de Gaulle was particularly vocal, viewing U.S. multinationals as threats to national sovereignty and culture. As French journalist and politician Jean-Jacques Servan-Schreiber wrote in his 1968 bestseller The American Challenge, “One by one, U.S. corporations capture those sectors of the economy most technologically advanced, most adaptable to change, and with the highest growth rates.”

Many Europeans used the same apocalyptic language we hear today: “seizure of power,” “invasion,” “domination,” “counterattack,” and “industrial helotry.”

Britain was more ambivalent—welcoming U.S. investment for jobs and technology while worrying about dependence. Labour governments in the 1960s occasionally blocked American acquisitions of British companies deemed strategically important. The government’s creation of International Computers Ltd (ICL) in 1968 was intended to provide independence from America’s IBM. It failed.

Italy developed strong Communist Party–led opposition to U.S. multinationals, viewing them as tools of American imperialism. Leftist parties and labor unions organized against major corporate presences in the 1960s and 1970s, especially in the automobile sector, where Fiat dominated the domestic market while competing with American imports and subsidiaries.

Japan largely shut out U.S. advanced-technology firms during its postwar high-growth period and slightly beyond (roughly the 1950s through the mid-1980s). Through a combination of protectionist industrial policies, including restrictions on foreign direct investment and trade barriers, as well as the keiretsu system of cross-shareholding, Japanese firms secured market share in high-growth technology industries at home and abroad while denying foreign competitors access to the domestic market. South Korea followed a similar path.

Canada’s relationship with U.S. multinationals was complicated by geographic proximity and economic integration, but opposition intensified in the 1960s. The Gordon Commission (1955–57) raised alarms about the extent of American ownership of Canadian resources and enterprises, prompting public and political concern regarding economic sovereignty. Its conclusions eventually led to the Watkins Report in 1968, which was even more alarmist and recommended that Canada enact targeted policies to curb foreign control, including screening mechanisms for U.S. foreign investment.

Embracing these findings, the “Waffle” movement within Canada’s New Democratic Party pushed for the nationalization of key industries dominated by U.S. firms. As its founding manifesto declared:

The major threat to Canadian survival today is American control of the Canadian economy… American economic control operates throughout the formidable medium of the multi-national corporation.

From Global Free Trade to Regression

Much of this anti-American energy faded during the high-water mark of global free trade in the 1990s and early 2000s. Pursuing discriminatory policies became déclassé. No one wanted to admit they were protectionist.

But as China broke the global trade model in the late 2000s, and others followed suit, the non-discrimination super-ego weakened and the protectionist id took over. Long-term cooperation became overshadowed by short-term political gratification. Suddenly, attacking American corporations could once again be labeled “patriotic” and “pro-innovation.”

At the same time, bipartisan consensus in the United States around defending its multinational champions to preserve domestic economic power and prosperity collapsed. The progressive left and nationalist right alike turned on American firms, especially Big Tech, mirroring trends seen in governments worldwide.

The logic then became very, very simple: “If America is willing to denounce its own tech companies, why shouldn’t everyone else?”

Digital Sovereignty: Digital Protectionism With Better Branding

As a result, today’s anti-American aggression is focused on digital companies, the engines of modern innovation and growth. Just as in earlier eras, governments are increasingly using regulation to punish U.S. tech firms or to unfairly restrict their ability to gain market share, even when those firms invest locally and compete on the merits.

This is now packaged under the apple-pie–sounding banner of “digital sovereignty”—that is, digital protectionism. Egged on by domestic firms hiding behind the curtain and whispering into ministers’ ears to take down their competitors, policymakers chant, “We just want sovereignty!”

Fine. If you really want that, then build your own GPS system. Your own credit card network. Your own email platforms. Your own shipping industry. Your own PC ecosystem.

Waste billions replicating existing technologies. Burn your best engineers on symbolism. Make no real strategic impact whatsoever. I might argue that those resources would be better spent investing in R&D in critical sectors where you could scale and maybe even eventually lead, but what do I know? I’m just a silly American.

Canadian policymakers, backed by small domestic tech firms, are pushing to limit American AI and cloud providers. Korea wants a Euro-style Digital Markets Act designed to hobble large, mostly American, platforms in favor of domestic incumbents. And many governments now treat Big Tech as a convenient piggy bank for their nation’s most powerful special interests: telecoms in Korea, newspapers in Australia, cultural and media industries in Canada, and the public treasury in the EU.

Sovereignty Cuts Both Ways

To America’s many frenemies: While you’re at it, tell the United States not to bother saving you if you’re attacked militarily. Sovereignty cuts both ways. If you want independence from us, then I assume you’re okay with us being independent from you.

Canada, it’s time for American maple syrup sovereignty. Korea, we demand ginseng sovereignty.

To their credit, Congress and the Trump administration have begun to push back, making clear that access to the U.S. market is not unconditional. But they cannot let up.

Congress needs to hold more hearings, make more joint statements, and show more backbone. And the Trump administration must maintain its resolve: Countries that persist in attacks on America’s leading technology firms cannot expect full access to U.S. markets—no matter how earnestly they claim it is “just domestic policy” or a righteous stand against “tech oligarchs.”

Sure. And I’ve got a bridge I’d love to sell you.

Most American policymakers and experts called for global free trade before the fall of the Berlin Wall and, later, the Soviet Union. With their collapse, this dream finally seemed possible. The so-called “end of history” meant the beginning of global integration.

As author Francis Fukuyama wrote in his influential book The End of History and the Last Man, “Privatization and free trade have become the new watchwords in place of nationalization and import substitution.” He went on to discuss China, stating:

The Chinese leadership has accepted the need for markets and decentralized economic decision making, as well as close integration into the global capitalist division of labor, and has shown itself willing to accept greater social stratification accompanying the rise of a technocratic elite.

Alas, his hope for freedom, coupled with American hubris, clouded his judgment. The reality is that Cold War–style competition and a major state-directed socialist market economy are back, this time led by the Chinese Communist Party and the People’s Republic of China. As such, it is time to acknowledge that the vision of global free trade must be put on hold—at least until China transitions to a democracy, if and when that happens.

The United States has long pushed for global free trade, often seeing it as its destiny to spread freedom through markets. This effort began after World War II, with many leaders championing a rules-based trading system to support recovery, stability, and U.S. strategic interests.

In 1946, the United States helped initiate negotiations for an International Trade Organization, culminating in the 1948 Havana Charter. The ITO was never approved. President Truman ultimately withdrew it from congressional consideration in 1950 amid growing domestic opposition and concerns about ceding U.S. sovereignty.

In the meantime, governments concluded the General Agreement on Tariffs and Trade (GATT), which was signed in 1947. The agreement entered into force on a provisional basis on January 1, 1948, with 23 signatories, aiming to reduce tariffs and other trade barriers on a mutually advantageous basis. GATT survived numerous subsequent negotiating rounds, expanding to more than 100 contracting nations by the end of 1994.

However, the Soviet Union was not a participant in GATT because it was fundamentally a non-market economy. But that did not stop globalists in the State Department from pushing in that direction.

In the summer of 1963, the State Department’s Policy Planning Staff prepared a report in response to a request by President Kennedy for a review of existing U.S. policies. The paper came as close as it could to calling for free trade with the Soviets, stating, “For a number of years now, we have attempted to maintain, virtually in isolation, a posture tantamount to economic warfare.”

The report went on to argue:

Less important but nevertheless real reasons for Soviet dissatisfaction can be found in: the Soviet belief that without U.S. restrictive policies, large-scale trade based upon credit financing and highly beneficial to USSR could be developed; in the Soviet desire to be sure of ‘the best’ in its technological imports; and in Soviet faith that the expansion of trade would give it important leverage, through the American business community, over U.S. policies.

Sound familiar? Chinese officials made nearly identical arguments prior to China’s accession to the World Trade Organization.

The Policy Planning Staff report went on to say:

At the same time, once a new start had been made on trade, the U.S. for the first time since the war’s end would be able to employ on a continuing basis the potentialities of trade as an instrument for political bargaining and for meaningful communication with the USSR.

Thankfully, nothing came of this memo. In part, this was because the Kennedy administration knew there would be widespread opposition in Congress and in other parts of the government, including the defense and intelligence establishments. And, of course, with JFK’s assassination in November of that year, the issue was shelved entirely.

A little over a decade later, Russia expert and trade scholar Harold J. Berman wrote in The Interaction of Law and Politics in Trade Relations between the United States and the Soviet Union:

The planned character of Soviet foreign trade is designed to insure that the Soviet economy as a whole benefits from each trade transaction. The success of the individual Soviet foreign trade organizations which export and import is measured by the extent to which they fulfill plans and goals set by the Soviet state. In contrast, individual American business firms which trade with Soviet organizations measure their success by the extent to which they fulfill their own individual plans and goals. By this system the public interest, it is assumed, is served indirectly in the long run; nevertheless, any given transaction, though profitable to the parties involved, may result in a net economic, political or military loss to the state. Also, the bargaining power of an individual U.S. firm vis-a-vis its Soviet trading partner is affected by the fact that the Soviet foreign trade organizations exercise a monopolistic trading power within the Soviet system, and in addition, have the backing of the Soviet state.

He continued:

Thus in order to protect both the national interests of the United States and the individual interests of U.S. firms, it is necessary for the U.S. government to play a much more positive role in conducting trade relations with the Soviet Union and other planned economies than it is accustomed to playing in conducting trade relations with market economies.

This was the dominant view in America. There was simply no way the United States would allow the Soviets into GATT. Notably, this same logic should have been applied to China’s CCP-led, state-directed market economy. It was not.

However, as the Soviet Union and European communism collapsed and the world supposedly reached the “end of history,” elite consensus rapidly shifted. The GATT framework came to be treated as capable of becoming truly global. This belief was institutionalized with the creation of the World Trade Organization in 1995 and with China’s accession just six short years later. After years of negotiation, Russia was admitted in 2012.

After President Clinton signed the China trade bill in 2000, granting permanent normal trade relations and paving the way for WTO membership, he promised:

The WTO agreement will move China in the right direction… China is not simply agreeing to import more of our products; it is agreeing to import one of democracy’s most cherished values: economic freedom. The more China liberalizes its economy, the more fully it will liberate the potential of its people.

The belief was that the WTO system was so powerful that countries joining it would be compelled not only to liberalize trade, something China has never sought to do, but also to integrate into the Western liberal order. Economic liberalization was viewed as a corrosive solvent, dissolving authoritarianism from within and clearing a path for political reforms aligned with democratic values and institutions.

This was foreign policy idealism run amok. As I have explained, U.S. policymakers and members of the trade and foreign policy establishment should have understood why this outcome was unlikely. They did not.

We are now left with the consequences. The question is how to move forward.

Current U.S. thinking on trade and techno-economic competition with China coalesces around three strategic camps, none of which are adequate to meet today’s challenge, as I detail in a recent report.

“Engagers” prioritize maintaining cooperative relations with China. They minimize Chinese malfeasance, accepting CCP predation as the cost of access. Engagers argue that China’s growth benefits global prosperity and that confrontation risks catastrophe. Many U.S. officials and pundits in this camp assume that Chinese cooperation is essential to addressing global challenges such as climate change and want to believe that China will help America shoulder the responsibility for global order. Their fundamental error is treating China as a partner rather than a strategic adversary, despite two decades of contrary evidence.

A version of the Engagers are the “Deniers,” who acknowledge China’s rise but counsel patience, believing the CCP will collapse under its own contradictions. Their “Peak China” thesis is comforting precisely because it demands no policy change to existing economic, trade, or national security approaches. But Deniers often mistake Chinese state capitalism for Soviet command economics, a fatal analytical error given that China has proven remarkably effective at generating growth and technological advancement.

A new variant, the “Partial Globalists,” is emerging. While this group calls for plurilateral trade deals among like-minded nations, it still clings to the outdated assumption that maximizing global allocation efficiency should remain the primary objective and that trade deals should focus on trade and little else.

The Partial Globalist approach is best illustrated by the Foreign Affairs article “After the Trade War,” by Michael Froman, president of the Council on Foreign Relations and former U.S. trade representative during the Obama administration. Froman begins with the obligatory “don’t blame trade” narrative (repeating the popular canard that most U.S. manufacturing job loss stems from technology rather than trade) before arriving at the core of his argument:

Clinging to the old system and pining for its restoration would be deluded and futile. Nostalgia is not a strategy; nor is hope. Looking beyond the existing structures does not mean simply accepting a Hobbesian state of nature. The challenge is to create a system of rules outside the rules-based system of old… But it might well be the most politically sustainable outcome that could—crucially—prevent unilateralism from spinning out of control. It would, in short, allow for a global economy shaped by rules even without a global rules-based system.

He goes on to write:

If an anarchical trade system [he means Trumpism] is undesirable, but a return to the status quo ante is impossible, that leaves one clear task: developing a new system of rules even as the global economy moves away from a fully multilateral rules-based system. The most viable option is to build a new system around open plurilateralism: coalitions of countries that share interests in specific areas and come together to adopt high standards on certain issues, and then remain open to other countries that share similar interests and are prepared to implement those standards.

Froman argues that if we cannot achieve the “first-best” solution, defined as Ricardian allocation efficiency across the entire globe, we should at least pursue a “second-best” outcome: free trade for much of the world, even if other nations develop agreements with China. After all, to him and other Partial Globalists, more free trade is inherently better than less.

But as noted above, this strategic approach remains rooted in the old paradigm that global allocation efficiency should be maximized. It should not.

Moreover, it misses the central lesson of the Soviet era entirely: U.S. trade policy must actively work to weaken adversaries, not engage in free trade that deepens interdependence while waiting for regime collapse.

Froman is right that the “Trumpian protectionism” approach, which often targets allies as much as adversaries, is not the answer. Many of the Trump administration’s key trade officials are autarkic nationalist protectionists who view trade as fundamentally unfair or as something that has hollowed out American manufacturing and the middle class.

They also believe the United States economy is large enough to be self-sufficient in virtually all goods and services, and many see China and regions such as the European Union as equivalent threats. This view not only takes the eye off the ball of the “main enemy,” to use Mao’s term, but also makes forming much-needed strategic alliances against China extremely difficult (as does threatening to invade Greenland).

American leaders from 1945 to 1989 understood that pursuing a Trumpian-style trade path was misguided. They were neither free-trade globalists nor autarkic protectionists. They were strategic realists who sought to build a coalition of the willing to trade freely while simultaneously limiting Soviet access.

We need to do the same today while limiting the CCP’s access.

First and foremost, this means we must stop focusing on trade for trade’s sake. Trade is not an end in itself. It is a tool that should be used to build allied power and constrain Chinese power, and it should be treated as such until the CCP no longer rules and China becomes free, democratic, and market-based.

That requires moving beyond trade agreements toward comprehensive strategic partnerships negotiated as unified packages. Facilitated trade should be one component of these packages, but only one of many. Comprehensive strategic partnerships should include:

1. Concrete reductions in unfair trade practices with the United States, including non-tariff attacks on U.S. firms

2. Security commitments, including agreements to minimum defense-spending thresholds

3. Coordinated export controls and import limitations focused on China

4. Commercial intelligence and counterintelligence cooperation vis-à-vis China

5. Standards cooperation

6. Deep technology and production partnerships in which both nations agree to support the development of each other’s advanced industries, among other measures

This will not be easy. This approach is unprecedented and uncomfortable for the international trade community in Washington. But the alternative is worse.

In a Washington Post article about the Trump administration using tariff threats to pressure allies to boost defense spending, former Acting Deputy U.S. Trade Representative Wendy Cutler stated: “This is the first time I’ve seen that type of request in a trade agreement. When you’re sitting at the negotiating table, you’re not talking about this stuff.”

She is right. This approach is new. But anyone implying that trade negotiations should exclude these considerations is wrong. Either USTR must evolve further into something closer to the USSRR (United States Strategic Relations Representative), or these negotiations must move decisively into the White House, whether under the current administration or those to come, with a range of stakeholders at the table.

Either way, the era of naïve global free trade is over. It is time for a fundamental change in U.S. trade policy, and not one based on isolationism or protectionism. The era of strategy must begin.

Recently, it has become fashionable for detractors of capitalism to argue that it took more than half a century for the benefits of the British Industrial Revolution to trickle down to average workers. In the meantime, the greedy capitalists got the goldmine, while the workers got the shaft.

And so, of course, we are told that this will happen again as AI “wipes out jobs” and lets a few tech bros strike gold, leaving one or two generations of immiserated proletarians in its wake. Why would any legislator want to put the policy pedal to the metal for AI when that’s the outcome? The answer is that they would not.

But that is precisely the point. The goal of today’s neo-Luddite, anti-corporate activists is to slow, if not stop, AI. Let’s all retreat to our worker-owned communes in Hobbiton.

However, this historical narrative is at best contested and, at worst, simply wrong. As is the current wave of AI prognostication. In a Washington Post op-ed from August, techno-optimist James Pethokoukis surprisingly succumbs to this pessimism, writing that:

During the Industrial Revolution, Britain’s productivity rose while wages stagnated — a period dubbed “Engels’s pause,” after Friedrich Engels’s grim account of industrial poverty. Early mechanization spoils went mainly to factory owners, while laborers saw their traditional livelihoods disrupted, sparking the infamous Luddite attacks on textile machinery. Britain’s leaders pressed ahead — and later generations reaped enormous prosperity — but the long lag in sharing those gains fueled years of social unrest.

James worries that the development of AI may lead to similar results today, only this time with policymakers unwilling to wait it out and instead moving to slow the pace of innovation.

But this is a misreading of history, albeit one many people fall for. The reality is that many prominent economic historians find that it did not take fifty years for wages to rise for the average British worker.

One article in the Economic History Review finds that “the evidence suggests that material gains were even bigger after 1820 than optimists had previously claimed, even if the concept of material well-being is expanded to include health and environmental factors.” Another study in Oxford Economic Papers found that the labor share of income changed little between 1820 and 1870, belying the notion that capitalists were capturing most of the gains.

In addition, pessimists gloss over several major disruptions that would have constrained both GDP growth and real incomes, as well as a key analytical distortion:

• Britain was still paying lenders the enormous debt incurred during the Napoleonic Wars after 1815.

• The period was marked by repeated years of poor harvests driven by adverse weather, which lowered output and living standards.

• Growth rates themselves have often been overstated, with more recent research finding that labor productivity growth during this period was actually quite low. Labor productivity averaged below 0.4 percent from 1770 to 1830, rising only gradually to around 0.8 percent by 1860.

This makes sense, as many of the key technologies now portrayed as revolutionary, such as the steam engine, had limited industrial applications at the time (for example, coal mining and rail transport). There simply was not enough new output for either workers or owners to capture.

Finally, let’s consider the term “Engels’s pause.” That Engels said this should indeed give us pause. Because of the incalculable human suffering and death their acolytes caused around the world, anything Marx or Engels wrote deserves deep skepticism or to be rejected outright. These were not admirable figures.

To take just one example, consider the sheer absurdity of Marx’s core claim that capitalist growth would continue while wages stagnated, thereby making proletarian revolution the only path to higher incomes. Consider this nonsense passage from Capital:

The accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, and mental degradation at the opposite pole.

Also from Capital:

Within the capitalist system, all methods for raising the social productiveness of labour are brought about at the cost of the individual laborer; all means for the development of production transform themselves into means of domination over, and exploitation of, the producers.

And finally, from The Communist Manifesto:

The modern laborer...instead of rising with the progress of industry, sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper, and pauperism develops more rapidly than population and wealth.

It is astonishing that these charlatans are still taken seriously, particularly on college campuses, many of which host their own Marxism clubs, given how completely deranged this hypothesis turned out to be. For it to have come anywhere close to reality—which clearly it did not, as median wages rose at least 15 to 20 times while profit rates did not explode—the laws of competition would have had to be repealed.

Capitalists would have needed the power to raise prices and keep wages low without any market consequences. That did not happen. Firms that adopted labor-saving machinery were required to lower prices in order to compete with rival firms installing the same technology. There was no enduring pool of “surplus value” for greedy capitalists to capture, except briefly for particular firms that had invented a genuinely “better mousetrap.”

Yet people throughout history, including people who were presumably smart and well educated, fell for this nonsense. Many still do today.

After all, if you want to destroy capitalism—and the freedom and respect for human dignity that come with it—you must first convince the peasants, the proletariat, and the intelligentsia that capitalism is an irreparably broken system. The way you do that is by spinning preposterous claims about capitalists hoarding all the gains. The world has suffered untold misery and death because of this fundamentally destructive doctrine and, in some places, continues to suffer today.

While most of today’s anti-capitalists (and capitalist doubters) are not full-blown Marxist-Leninist-Maoist totalitarians, they nonetheless seek to limit technology and constrain corporate capitalism. In that context, promoting the idea that AI’s benefits will flow only to the rich is no accident; it is entirely consistent with their agenda. We are warned not to repeat the so-called mistakes that much of the world made after the 1820s.

Finally, lest anyone assume I am a card-carrying, Paul Ryan–style free-market libertarian conservative, let me assure you that I am not. I am happy for the state to play a key role in what Mike Lind and I have called “national developmentalism.” But national developmentalism works only by supporting firms operating within a capitalist system and by endorsing and embracing, rather than demonizing, technological change. Anti-corporate, anti-capitalist, and anti-technology policies are a dead end for growth and innovation—and, if anything, a reliable recipe for keeping the proletariat immiserated.

As I watch what the EU, and particularly Brussels, is doing, it makes me wonder if they ever got the memo about adjusting their thinking to the actual world, to today’s reality, not the utopian one they still believe they can live in (and lead) if they just wish hard enough.

So, in case they didn’t get the first, or maybe they just forgot, I’ll go ahead and make sure they “get another copy of that memo.”

Here it is.

Memorandum

To: EU Officials

From: Lumbergh

Subject: The New World Reality

Hey EU, we all know that for more than a decade you’ve been trying to impose your vision of the world on both yourself and the rest of us. I hate to break it to you, but that hasn’t worked out all that well for ya.

Climate

Let’s start with “climate action.” You have made fighting climate change your top priority. Thanks. But you have failed. Sure, EU emissions have fallen 37 percent since 1990, but solving the problem requires reductions closer to 90 percent, and most of the low-hanging fruit has already been picked.

Moreover, and I’m sorry to be the bearer of bad news, it’s called global warming for a reason. The only measure that matters is the change in global greenhouse gas emissions, which have increased by around 60 percent since 1990.

It really doesn’t matter what you do domestically if the technologies the world needs—clean energy technologies that are as cheap and as good as the dirty ones—don’t exist at scale. Only then will nations adopt them. And we’re a long way from that. If you had these technologies, you wouldn’t need to subsidize or force their adoption in the first place.

Oh, and your wishful thinking that green means growth. The European Commission writes, “The European Green Deal is transforming the EU into a modern, resource-efficient and competitive economy.” I know that’s a good sound bite, and useful for getting voters to drink their green castor oil without complaint, but it’s just wrong. Real EU electricity prices have increased over the last decade, even with large subsidies funded by taxpayers. So much for a competitive economy.

But wait, green is the new industrial policy! You claim that the Green Deal Industrial Plan enhances competitiveness “by creating a more supportive environment for scaling up the EU’s manufacturing capacity for the net-zero technologies and products required to meet Europe’s ambitious climate targets.”

The green market is just not that big. Your own projections estimate that the global market for key clean technologies may reach around €600 billion a year by 2030, which is well under 1 percent of projected global GDP. Clean tech also tends to displace legacy energy and industrial activity. For every euro of growth in green, there is likely a euro of decline in dirty-industry value added and jobs. It is simply not the engine of growth you pretend it is.

On top of that, dear EU, it’s unclear whether you will win. China is far ahead in batteries, solar, wind, and nuclear, dominating most clean-tech supply chains. Finally, according to OECD data presented in a forthcoming ITIF report, the EU’s global share of machinery and equipment—the industry group that includes much renewable-energy manufacturing—has fallen 18 percent over the last decade, while automobile production has remained flat. So your grand industrial strategy, overindexed on green, does not seem to be working.

Trade and Globalization

Okay, how about trade and globalization? For at least a decade, EU officials have spun a story about how you were the defenders of free trade and the rules-based order, unlike the American heathens. That at all costs the WTO must be protected as the guardian of global market integration.

Europe, if you still believe this, you are immune to reality. The WTO has failed. It is utterly incapable of disciplining the worst trade offender on the planet, China. This is the same country that restarted the trade war as soon as it joined the WTO.

And yet you continue defending the global trading system as though it still functions. How can the EU champion WTO orthodoxy in the face of unrepentant Chinese mercantilism—closed markets, IP theft, massive subsidies, standards manipulation, forced technology transfers, discriminatory treatment of foreign firms, and more? It defies logic.

I understand you’re ticked off at Trump about tariffs and trade negotiations, but let’s be serious: You cannot possibly believe that China will work toward a trading relationship built on “fairness and reciprocity.” How long will you keep begging Xi before you admit the obvious? Beijing will never play by those rules. Well, actually, they might, after the CCP has deindustrialized Europe. Free trade for tourism! The only reciprocity or level playing field possible is through coordinated action with the United States.

And since we’re on the subject of EU openness, a quick reality check: If the EU were truly as open as you claim, why did UK–EU trade decline when the UK left? If openness were real, not rhetorical, there should have been no change. Also, let’s not forget the EU’s long-running trade surpluses (at least until recently) with the rest of the world and the not-insignificant import quotas free-trading Europe imposes. Remind me again, aren’t tariff quotas a form of protectionism?

Precautionary Principle

We can’t have a memo like this without mentioning the precautionary principle, which dominates EU policymaking. Europe firmly believes it’s “better to be safe than sorry,” and you interpret that as restricting any new technology that carries even a hypothetical risk. But here’s the obvious point, at least obvious to many other governments and to your own business leaders: Innovation is inherently risky, and avoiding that risk guarantees stagnation.

We live in a world of cutthroat competition from China, where nations are racing to capture the advanced industries of the future. Yet here you are, holding philosophical seminars about “AI for the common good” and similarly abstract notions—all while designing regulatory regimes to control new technologies before they even get out of the lab.

Likely because you believe that if the EU leads in regulation, it will lead in innovation. Please, have an honest discussion about that one; don’t just drink your own Kool-Aid. Your lead in regulation is inversely related to your lag in innovation.

So yes, despite your decades-long belief to the contrary, operating under a risk-averse system has consequences. Mario Draghi’s report to the Commission spelled them out clearly. In the last 50 years, not a single new European firm has reached a market capitalization above €100 billion, and between 2008 and 2021, 30 percent of European unicorns relocated to the United States. Draghi’s diagnosis? “Self-defeating” regulatory burdens.

Europe’s precautionary principle is not just a regulatory philosophy; it’s an institutional and cultural constraint contributing to your economic and technological decline—again, all while China races to achieve techno-economic supremacy over the Western democratic world.

Digital Sovereignty

Let’s not forget the best one, digital sovereignty, a truly bizarre and protectionist idea. But wait, there’s more! Your new audacious plan for a homegrown “EuroStack,” something achievable, if at all, only with enormous subsidies and staggering costs.

European policymakers commonly portray digital and tech sovereignty as a bold yet nebulous aspiration: greater state control over digital infrastructure, technologies, data flows, and standards, paired with the hope of replacing U.S. technology firms with European ones.

Look, we all know what’s actually going on. Just be honest and say, “Hey, we don’t want free trade or global division of labor; we want our own digital industry through regulatory protectionism and non-tariff attacks on American tech companies.”

Of course you won’t say that, so EU leaders dress it up in talk about “European values,” privacy, and security. But you already have control over what U.S. companies do in Europe through sweeping regulatory regimes such as the Digital Markets Act, Digital Services Act, AI Act, and the General Data Protection Regulation. Having your own IT companies won’t change that, although it would weaken overall IT use and innovation in Europe.

And digital sovereignty is not a one-way street. If the EU discriminates against foreign providers, it risks retaliation. Here’s a thought experiment: The United States needs aviation sovereignty. No more European airplanes for America. Airbus values are just not American. (And actually, Europe already practices this in reverse, as its airlines largely buy from Airbus.)

Europe, you can continue your quest for digital sovereignty, but you remain underfunded, fragmented, and overregulated in precisely the sectors needed to succeed. This path will result in tens of billions of euros wasted to prop up industries you are better off sourcing from allies such as the United States (and vice versa). Want is not enough without access to capital, industrial capacity, innovation-friendly regulations, and strategic alliances.

The New World Order

Finally, Russia, China, and the new world order. For too long, when it came to international relations, the EU wanted to be the Venus to America’s Mars—the world’s nurturing mom while America played tough dad. Europeans were the warm people, the helpful people, the people who believed every geopolitical crisis could be resolved through “constructive dialogue” and another committee meeting.

The last few years have made it clear that dad is still needed. The Russian invasion of Ukraine exposed the EU’s dangerous military weakness. More importantly, Xi Jinping has made it abundantly clear that his goal is global hegemony. Yet Europe remains anchored to outdated policies built on the illusion that it can appease China, maintain market access, and avoid becoming the next target of China’s industrial eradication campaign.

Message to Brussels: China is not just another normal country. BMW and Daimler selling a few more cars in China for the next couple of years does not make you partners. China is your adversary. And soon you won’t be selling any cars there at all, while Chinese automakers will be selling millions to you.

And yet the recent, frankly baffling UK capitulation to Beijing on the Chinese spy cases shows that backbones are weakening and we are late in the game. Even if the EU and the United States finally reach a broad consensus on the real nature of the China challenge, domestic action alone will not be enough. The United States cannot prevent Chinese global technological dominance without full and unstinting transatlantic cooperation, because if China wins in Europe, its firms will become too powerful for American companies to compete with. But hey, at least you won’t have to deal with those damned Yankees.

Unfortunately, Europe seems to believe it is competing against both the United States and China—a strategic fantasy that plays directly into Beijing’s hands. The sooner you recognize that only an alliance among Europe, the United States, and key Asian democracies, especially Japan, can prevent Xi’s vision from becoming reality, the better chance we have of not losing.

We need to join forces, Europe. But if you refuse to step up to defend the West, at least face reality: The inevitable outcome will be continued EU decline and, ultimately, Chinese techno-economic hegemony.

PS: The New U.S. National Security Strategy

Given the reaction in Europe over President Trump’s recently released U.S. National Security Strategy (NSS), let me clear up one thing: The NSS isn’t an attack on Europe—it’s a mirror. And Brussels does not like what it sees.

The NSS is not an effort to weaken Europe; it’s an effort to strengthen it. It isn’t “anti-Europe”; it’s anti–European drift. The point is not that the EU should shrink; it’s that the EU should compete.

Many Europeans may dislike its bluntness, but bluntness is not hostility. What the NSS actually argues, repeatedly, is that Europe remains strategically, economically, and culturally vital to American prosperity and global freedom. The document explicitly states that writing Europe off would be “self-defeating for what this strategy aims to achieve.”

The Trump administration’s message is that Europe is facing internal challenges—economic stagnation, insufficient military capabilities, overregulation, excess low-skill immigration, political fragmentation, and a crisis of civilizational self-confidence. Pair those issues with regulatory suffocation, external dependencies, and priorities detached from global competitiveness, and Europe will continue to decline.

The NSS is saying to correct course. It wants a Europe capable of partnering with the United States to shape the world and deter hostile nations like China, not one that remains strategically dependent, politically paralyzed, and economically adrift.

That is why the NSS stresses that Europe must “stand on its own feet” by taking primary responsibility for its own defense, rebuilding industrial capacity, and ensuring it cannot be dominated by adversarial powers. (Hint, in case you need it: The United States is not your adversary. And if you really believe that it is, tell us to get out of NATO.)

This is not abandonment; it is empowerment. Perhaps Brussels should see it as a vote of confidence in Europe’s potential strength, if you choose to exercise it.

Okay, end of memo.

In sum, Europe, your vision of a green, globally integrated, non-disruptive, pacific world is a lovely one. Maybe in 30 or 40 years you can try again. But for now, it’s time to wake up and smell the coffee of reality.

I, and many others, invite you to stop relying on clean energy sound bites, philosophical seminars, and regulatory crusades and instead build the real industrial and military capabilities that matter in today’s world, which is defined by hard power, dominance in national power industries, and, most importantly, strategic partnerships with free nations that respect democracy and human rights.